New Hope Corporation Limited

Good morning, everyone. Thank you for joining us today for today's presentation. I'm Rob Bishop, Chief Executive Officer of the New Hope Group. I'm joined by Rebecca Rinaldi, our CFO, and Dominic O'Brien, Executive General Manager and Company Secretary. Before we begin, I would like to touch upon the escalating conflict in Iran and across the Middle East. The loss of civilian life and the scale of displacement are deeply distressing. The conflict has heightened concerns around global energy security, contributing to increased volatility across the energy markets, including upward pressure on coal price. The company is closely monitoring the situation and assessing how these developments may impact our operations, markets and broader business outlook, ensuring we respond in a measured and responsible manner. Further updates will be provided in future reporting. This morning, we released our half-year results for the 2026 financial year. Hopefully, you've had a chance to go through the presentation, but in any case, I'll step you through our key highlights before we open up the lines for the Q&A session. Over the last six months, we have seen an unfavourable movement in our 12-month moving average TRIFA, which has increased from 3.22 to 3.8. The safety of our people remains our highest priority, and we are implementing targeted measures to address this trend. Despite a period of recovery at Bengala Mine, the group maintained saleable coal production volumes compared to the previous period, thanks to the continued ramp up of operations at New Ackland Mine. The group delivered run of mine coal production of 7.9 million tonnes, saleable coal production of 5.5 million tonnes and coal sales of 5.6 million tonnes. In terms of our financial highlights, we delivered an underlying EBITDA of $215 million and a statutory net profit after tax of $54 million, both of which were impacted by lower coal pricing compared to the previous period. Despite softer coal prices and certain short-term operational challenges, our assets remain resilient and continue to generate solid margins, which allow us to maintain returns to shareholders. On that note, I'm pleased to announce the board has declared a fully franked interim dividend of 10 cents per share. As I mentioned earlier, we have seen unfavourable movement in our TRIFA and a slight improvement in our all injury frequency rate over the last six months. We are fully focused on ensuring our people operate in an environment where they are unharmed. We have several safety initiatives in place to revise this trend and restore the improvement trajectory that we have been experienced more generally over the last 18 months. During the period, increased prime waste volumes were delivered at Bengala Mine, which supported the realignment of the pit sequence following significant weather events across the Hunter region late in FY25. The re-establishment of the Bengala mine's pre-stripping activities resulted in lower wrong coal production and ultimately saleable coal production compared to the previous period. At New Ackland mine, the ramp-up continues to progress, with the assets delivering healthy increases in both wrong coal production and saleable coal production. Despite low volumes at Bengala, the group was able to maintain saleable coal production volumes at a consolidated level, reflecting New Ackland mine's increased contribution to the group. During the period, the thermal coal market was impacted by economic uncertainty, oversupply and weakened demand, which resulted in lower coal prices. The group's average sale price, including hedging, was $139 per tonne, approximately 20% lower than the previous period, which impacted both underlying EBITDA and cash flows from operations. Despite lower coal prices, the group's low-cost assets delivered a solid margin of $41 per tonne. Our business generated $185 million in cash flows from operating activities, which enabled reinvestment in our assets and allowed continued return to shareholders. During the period, we returned $124 million to our shareholders, representing the fully franked FY25 final dividend of $0.15 per share. Regardless of pricing dynamics, our portfolio of low-cost assets provides resilience in a cyclical environment and assists to ensure that we continue to generate margins. In a period where the coal price has remained subdued, we were able to generate margins of approximately 30%. This showcases our low-cost nature, as well as the significant upside potential available to New Hope and ultimately our shareholders in higher coal pricing environments. Our approach to capital management is underpinned by a disciplined focus on delivering sustainable returns to our shareholders. The group's strong cash generation allows us to sustain our current baseline of production whilst also investing in our organic growth profile. Our two forms of capital returns are fully frank dividends and on-market share buybacks. The pace of the share buyback has slowed in recent times. Following increases in company share price, however, it remains on foot to provide us with optionality. As previously mentioned, our board has declared a fully franked interim dividend of 10 cents per share. New Hope has had a significant franking account balance and will continue to utilise this value for our shareholders. The dividend reinvestment plan, which we announced in September last year, will be in operation for the interim dividend. Looking ahead, the outlook for our business remains positive. In the short term, Bengala Mine is expected to return to its 13.4 million tonne per annum ROM coal target in the second half of FY26. In addition, New Ackland Mine will continue its ramp up, including the commencement of mining activities in the Manningvale West Pit, scheduled for the final quarter of calendar year 2026. We remain confident in achieving our full year physicals and cash cost guidance for FY26, all of which are tracking strongly. In the medium to long term, we are focused on remaining a resilient, low-cost coal producer while executing our organic growth plans, which will enable us to continue to deliver shareholder value. Thank you very much. I'll now hand over to the operator to start the Q&A session.

Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to cancel your request, please press star two. And if you're on a speakerphone, please pick up the handset to ask a question. And if you do wish to ask a question via the webcast, please type it into the Ask a Question box. Your first phone question comes from Rob Stein from Macquarie. Please go ahead.

Rob, and team, thank you for the opportunity to ask a question this morning. Just two questions on the Iranian conflict. Diesel inputs into your operations, I'd imagine, are pretty significant. Can you give us a feel for, one, the cost sensitivity that you might experience, and two, just how secure your safety stock is of fuel at this current point in time?

Sure, no problems, Rob. It's certainly something which we're monitoring very closely at the moment. I guess from an impact on the business with regards to price, if we look back, say the last 12 months, we probably averaged about 13%. of our cost base being diesel usage. And then you could probably look a bit further at our rail providers, for example. We do have a direct impact for diesel price through those. So although, you know, reasonably material, we're probably not looking at much more than maybe around 20% of our overall cost base to put coal on a boat. So, and given our, I guess, our low cost base, the percentage increase on that is relative. Probably more importantly, the increase in coal price impacts 100% of our books. So although we're going to see a bit of increase in unit costs due to diesel, that should be far outweighed by the increase in coal revenues. I guess to your second point, as I said, we've certainly been monitoring it very closely. um discussing it with our with our diesel providers we've also been you know discussing within our own industries but qrc new south wales minerals council um and the mca um and also with our rail providers and any other you know influences anything which is influenced by price you know explosives etc at the moment We don't see any near-term risk in supply. We do have good supplies coming through, but we are certainly monitoring it closely. And I guess thinking about how we would prepare for a situation with reduced diesel availability, but nothing on the horizon is looking concerning at the moment.

And yeah, obviously on the flip side, you're seeing pretty good demand for your product, I'd imagine right now. Has there been a swing in terms of the customer base that you're seeing in terms of whether it's different countries or different providers looking to get access to the raw materials, given just the volatility and the change in raw material inputs, or sorry, the change in energy flows globally?

Any new customers banging down the door? I guess in our situation, we've got, you know, long-term customers who will continue to take our coal. We sell a very small amount on spot. You know, our books well sold out. We have, you know, long-term contracts. We're seeing consistent demand. I think it's fair to say that, you know, there was a lot of learnings from the Ukraine crisis with regards to security of energy supply. But certainly, you know, as we've seen, coal prices have increased and we've seen the direct benefit of that given all of our coal is contracted to the industry. So that is starting to flow through our result for the second half of the year for this group. But I think demand will remain consistent, but I think things could change very quickly if there was a major impact to gas supplies or the like.

And sorry, just a final question. Is that what gave you the confidence to pay that dividend that obviously the market expectations that sort of was higher in terms of payout ratio than previous periods?

I guess when you look at the dividend, that was based on our view of performance for the first half. I guess we're in a good position that our assets are low cost. And even if you look at the pricing over the first half, I think it's probably fair to say it's near to or at the bottom of the cycle. Given our low cost nature, we can still pay good dividends and release that franking account asset to the shareholders. You know, it's yet to be seen what will happen with the Iran war over the second half. And we'll think about that as we come into the end of the year. Well, thank you very much. That was a great colour. No problem.

Thank you. Your next question comes from Lynn Lawcox from Baron Joey. Please go ahead.

Good morning, Rob. Maybe just any comments you could make. If I look at coal equivalent pricing based on gas pricing, it should be north of 300 bucks a ton. Any comments you can make on, I mean, really the coal price move of like 30 bucks seems quite low relative to all energy, all other energy. Any observations you could make?

Yeah, it's a good observation. And I think it's fair to say that discount has been around for some time now. So as to why that is, there's a lot of factors in that. But, you know, I think that discount is discontinued. But, you know, things can change when it comes to actual supply of gas. That's when I think you'll see a tightening potentially if gas is constrained.

Okay. So are you seeing any other sort of movements on coal flows then, you know, in terms of, you know, obviously now with thermal almost in line with semi-soft, it's not worth washing it, not for you, but for some of your peers. I mean, it's not, you can't change it overnight, but do you think there's a bit of that going on? Coal, this price is sort of moving differently in from a flow perspective?

I think on your point with semi-soft, you know, it's... We did see a bit of an increase relative to thermal for coking coal when, you know, coking coal, I think about a month or so ago, increased to about 250 while... while thermal coal stayed in the low hundreds. But it was pretty, it wasn't that long ago. And I think now that thermal coal prices has increased relative to coking coal, I don't think we probably had a chance to see much movement of semi-soft flowing into thermal. I think if that maintains for many months, then you'd probably see that movement. I think as far as general coal flows go, haven't seen too much change there. I mean, our destination for our coal is, has stayed the same and, and probably will no matter what the outcome, um, just by virtue of the fact we've got long-term customers at both, both operations, you know, predominantly into, you know, to, to Asia. Um, so, you know, we, we don't have a huge spot, um, book to, to, to direct the coal anywhere else.

Yeah. Okay. And then maybe just, um, Thinking about the dividend, I know you sort of talked a little bit about it's all about balancing the needs of the business. But I mean, you've brought your cash balance down by almost $100 million over the half. Where do you see that cash balance going? I mean, you've got competing needs, another 12 months of CapEx, and then you're probably out the back end. You've got your convertible note in 12 months' time. to deal with that potentially. But as you've said on the previous call, it's probably unlikely to be put to you at the current share price. Where do you think the business needs to sit long-term cash-wise?

So I think, you know, if you look at our capital requirements at the moment, the focus is, you know, capital into the business for the Ackland ramp up and some, you know, fleet replacement at Bengala. You know, we've got some guidance in the results which talk to that. So that's certainly a focus in Bengala. the best use of our funds to ensure the ramp up at Ackland to that sort of circa 5 million tonnes annualised production and also, you know, consistency of production at Bengala. So that's, you know, first and foremost. And then really, you know, you've already touched on the convert. So we're aware of that. We're managing that. certain outcomes which might come from that. And then really it's, you know, focusing on returning, you know, value to shareholders through fully frank dividends. And obviously, you know, a price increase, you know, there's probably a fairly strong correlation between dividends and price. But, you know, it's a pretty uncertain time with what's happening in Iran. And we don't want to get ahead of ourselves and assume that, you know, that increase, you know, price is going to stay, but we'll keep following it.

And then just finally, you probably saw Port of Newcastle and you followed it closely. Shipments were an eight-year low for the month of February, but the weather wasn't bad. Was there something going on that saw an eight-year low for February exports in the Valley? Anything you'd want to call out on your ops?

Yeah, I mean, it's been heightened for some time now. And, you know, you've seen that flow through our result at the beginning of, you know, the first half of this year. We had weather impacts, which predominantly was logistics related and same with our result for the final quarter for last year. So, yeah. I think the fact that it's at an eight-year low, you know, there's always going to be records set, but it's good to see the port freed up down there and ships getting out. You know, that certainly helps the whole industry.

So there's nothing untoward in your first six weeks of your next quarter for Q3 at all to call out?

No.

All right. Thanks very much.

Thank you. Once again, to ask a question via the phone, please press star one. Your next question comes from Daniel Roden from Jefferies. Please go ahead.

Hey, guys. Thanks for taking my question. Just wanted to ask a quick clarification just on your pricing and contract mix over the next three to six months. It's on that note that you've forward sold for the next three months. I just wanted to clarify if there were any hedging that you'd undertake over that period just to consider.

Yeah, so we've got some, I guess, existing hedging in place, and then we've also placed some more hedging in the last couple of weeks off the back of, I guess, heightened forward pricing.

Just to clarify on that, that's all paper hedging as well? Yeah. It's not physical?

Yep. Okay. And I guess just on the Bengala recovery, can you provide a little bit of, I guess, colour around returning? You mentioned returning to that 13.4 million times per annum run rate. Is that consistent across the entirety of, I guess, the second half? Should we just be flatlining that run rate or are you still seeing, I guess, the pitch Red line and free strip recovery, likely you're going to see a bit of a ramp up in that capability and that's probably more of an end run rate.

It should be consistent for the majority of the half. You know, the first half was really about, I guess, overcoming those initial issues to wet weather and re-sequencing. But it should be a fairly consistent second half, you know, obviously, you know, excluding any unforeseen impacts due to weather. But no, it should be sort of back to where the growth project, you know, projected it to to that 13.4 annualised.

And is that consistent with, I guess, with strip ratio and, I guess, costs as a derivative? Like strip ratio is it back to, you know, kind of four times?

Yeah, I think there's probably some guidance there, but yeah, it's more back to life of pit expectations. Obviously, there'll be some swings and roundabouts between months, but on average, it should be pretty consistent.

Yep, awesome. And just one last one for me, more of just a financial kind of a hard nuance, but depreciation was probably a little high in the period. Just wanted to, I guess, I'm sure you can understand, I guess, where that step up is and should we be carrying that forward? Is it just, you know, increasing in overall business activity and additional purchases from equipment, like having heavy machinery kind of stuff, or is it just one-offs?

So it's two main things, Daniel. So one, it's the completion of the growth project at Bengala. So you might remember that was about 200 million, which came through to really uplift that production capacity and get us to that 13.4. So now we've seen almost a full 12 months of all of that equipment and infrastructure coming through that DNA line. And the other one relates to Ackland. So in there you would see, I guess, in the 31 July 25, you'll see commentary about the box cut. So that was opening up that Willaroo pit. So those additional costs to open up that pit are capitalised and then amortised. You shouldn't see those big jumps now, and we should almost start to see that slowly unwind, but for general sustaining capital come through the business. Keeping in mind, we do have that final $130 million at Ackland to spend to get to Manning Vale West. So that, again, will impact that DNA line.

Yep, yep, perfect. Awesome. Thanks, guys. I'll hand it over.

Thank you. There are no further phone questions at this time. We'll now address your webcast questions. Your first question asks, are Indonesia still putting on export controls on thermal coal exports? What is the upside for steaming coal?

Yeah, so that happened some time ago and we did see some, I guess, inflationary impacts on price. It's probably been overshadowed now by by what we're seeing in Iran. So it's hard to sort of unpick what the impact of Indonesia is, but certainly, you know, the Iran conflict has had quite a material push up in price.

Thank you. Your next question asks, why have you extended the on market share buyback?

Yeah, sure. So I guess our capital management strategy, which you see in the slide, just points to opportunistic and flexibility in our share price. So where we've seen a significant reduction in our share price and we really feel our assets are undervalued, that's when we will buy back shares. So having that flexibility and that optionality to jump into the market when we see value, that's why we turned it on or kept it turned on and will continue to monitor the share price and be active when we see value. Putting aside the fact that at the moment, the best way to return shareholders funds or value is through dividends.

Thank you. The next question asks, you have provided guidance on the growth capital at New Ackland Mine for around $130 million. What is the timing expectation on that spend?

So that should be roughly over the next 12 months. So we've awarded the contract. So this is for the road realignment. So we can open up Manningvale West Pit. And that essentially gives us the pathway to ramp up to the 5 million product tonnes per annum. So roughly over the next 12 months, we'll be executing that capital.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Bishop for closing remarks.

Thank you. And thanks all for dialing in. Thank you.