Whitehaven Coal Limited

Good morning, everybody, and thanks very much for joining us for our half-year results presentation for FY25. I appreciate you all taking the time. I'm here with our CFO, Kevin Ball, as usual, and, of course, our COO, Ian Humphreys, for any questions and supported here, of course, as always, by our investor relations team in the room. I'll go through the presentation, and Kevin will deal with a bunch of slides here in relation to certain sections of the presentation, and then we'll get to Q&A because I'm sure there's There's going to be a few questions. And I know you've all got a busy day, so I'll try and get right through it with many companies releasing results. I do want to just momentarily at least draw your attention to the fact that, as you can see from the presentation, there has been a bit of a change in terms of the branding of the company. So Whitehaven has refreshed its brand. I don't want to make too much of it. And for those worried about costs, it's not an expensive exercise. We've been very frugal in doing that, but we have modernized it and given it a nice contemporary update. And you'll see a bit of a change there. The business has doubled. So we've taken our triangle and added another triangle. So we've got two triangles and we've rotated 90 degrees to form our W. So If I've lost all of you with the marketing speak, just go to our website and have a look and you can see how that works. But we think the company has changed. We've entered a new chapter over the last 12 months and a contemporary branding and refresh we thought was appropriate given the transformation of the company. But we're still cold. Cold's in our DNA. Very proud of the industry we're in and the business we've created. So no change in that regard. Over the page is the usual disclaimers because we do have some forward-looking statements that are involved in this presentation, so I'll draw your attention to that. And then we'll get over to the highlights. Dealing firstly with safety, safety results at our TRIFA at 4.9 is a solid start to the year on a combined basis, being this our first full financial year of our expanded footprint. So 4.9 was definitely a good result, but there's no There's no doubt in our minds that there's more work to be done here and making sure that our expanded footprint, everybody's working together across the same stance with the same safety systems, we know we can do better than 4.9. On the environmental front, we are entering our third year now of zero enforceable actions on the environmental front, so very pleasing to see that progress continuing. If I move over now to the operational and financial results for H1, for FY25, Some of these numbers will be familiar with you already. 19.4 million tonnes obviously for ROM production and 14.2 million tonnes on equity sales. We've effectively doubled our volumes and sales with the addition of Dornier and Blackwater. We've achieved, as you know, an average price of $232 Aussie across the group, being $247 for Queensland and $211 for New South Wales. Unit costs have done well. So the first half, we're at 137. That's total costs, not mining costs, which is below the bottom of our guidance range. So we're tracking very well there. Encouraged to continue that momentum for the balance of the year as well. Revenue of $3.4 billion was 64% metallurgical coal sales and 36% on the thermal side of our business. Underlying EBITDA was $960 million. Very good result. Queensland contributing $588 million. to that underlying impact of the business was $328 million for the first half. Certainly seeing the benefits now of a bigger business with scale and diversified across both met and thermal products. We had $32 million of acquisition-related costs in there and transition costs pre-tax. And we've reported $326 million of non-cash-related financing adjustments in relation to FX adjustments and also discounting unwinding through our finance line. So Kevin is going to pull that apart for you with some slides a little bit further later on. We are going to pay a fully franked dividend of $0.09 per share, which will be paid on the 14th of March, representing a payout ratio of 37% of profits from the New South Wales business in line with our stated dividend policy. We've also announced the resumption of a modest share buyback of equal value in dollar terms, being $72 million, which will be executed over the next six months. On a combined basis, the return to capital represents 44% of the payout ratio for the underlying group impact for the half year. The board's confidence to reinstate the buyback at a modest level at this point was certainly influenced by the on-time returns confirmation, one-time formation of our joint venture, Blackwater, coupled with recent share price movements, you know who you are, which made the buyback look very compelling from our perspective. Now, just over to these charts on our revenue, you understand this, you've seen this before, but just confirming again, metallurgical coal, We have clearly transformed our business. The revenue share is 64% versus 10% metallurgical coal for the previous year. Japan certainly is the premium bedrock of our business and on our expanded footprint still represents 50% of our sales. But if you look to the right there and look at those sales, you can see there's a nice spread of other customers and emerging markets, which bodes well for the future. India now 11%, China 11% of volumes, all metallurgical coal sales in those two markets there. Korea, Malaysia, and Taiwan in aggregate about 20%. And in the case of Korea and Taiwan, moving more into the metallurgical coal space as well, having historically been more thermal-based markets for us. So the acquisition, as I say, is delivering diversification benefits and looking very positive for that spread of new jurisdictions, all which have nice growth opportunities in them for the future. Over again, these charts will be familiar to you, so I won't really dwell on them too much. Global supply demand on the left-hand side there in terms of the high CV thermal market and the same for the metallurgical coal market on the other side. Certainly, these commodity insight graphs depict certainly an interesting drop-off in supply, but growing demand at the same time, giving rise to those deltas. You can see they're 139 million tonnes on the thermal side of things, out to 2040, and over the same time horizon, a 74 million tonne deficit on the metallurgical side of things. I think the interesting trajectory here, just on the left-hand side in particular, is the runoff of available supply of high CV thermal, which We're certainly very well leveraged, too, and look forward to capturing the benefit of that delta as it continues to expand driving prices in the right direction for us. I'm over now on the market conditions slide. Now, there's a lot of stuff in here, so just bear with me as I get through it. But we'll just cover off on some of the dynamics. Demand for our met coal and also thermal coal is very strong. So we're not seeing any changes in there, despite what we'd say is a relatively soft market. On the thermal side, we've obviously got long offtake agreements there, which allow us to move our way through cyclical changes pretty well. And pricing and premiums remain good based on that contractual position. I would say, though, that if you're trying to move incremental times outside of that and you've got high CVE coal, the best you can see at the spot market at the moment is a GC flat outcome. But that's if you're uncontracted and looking to move incremental times. On the MET side of things, MET's actually been relatively resilient. We'd like to see the Indian market pick up a little bit more, and we certainly had expectations of that. Having said that, there's obviously lots of cheap Chinese steel in the marketplace, and I think that is putting a little bit of a weight on the market overall. But for the first half, the PLV averaged about US$206. As I say, for Queensland, we got US$247 for the sales in Queensland and US$211 for New South Wales. Excuse me. Now, just a note, just worth noting just on the contingent payments for our Queensland acquisition. That number previously advertised in our quarter had been tracking around the $33 million mark, I think. But given the softness in the market, we think that's going to come off a little bit further. Excuse me. Scratch the throat. On the cost side of things, as I say, 137 is a good result. We think that with the momentum in the second half, we can continue to keep our costs down the bottom end of the range. So very encouraged to continue to do that. We're certainly seeing productivity and cost out opportunities materialize in the results we've got to date. In Queensland, we see further upside of being able to continue that pathway into the future. I do note that our New South Wales cost base does have, is going through a period of temporary higher costs, and we thought we'd draw some of that out for you and highlight some of those dimensions of that to you and when those costs might be alleviated. And Kevin will go through that in one of these slides a little bit later on. I'm over now to the operational side. Again, I won't dwell on this too much because you've seen both of the slides on New South Wales and Queensland, but just to reiterate, 19.4 million tonnes for the first half on a managed ROM basis and 15.8 million tonnes on a managed sales basis across the business as well. So ROM basis 90% up on period on period and doubling of our managed coal sales. Splitting this apart a little bit, New South Wales, 9.4, good results. A little bit less than our period on period, I have to say, but that is in accordance with our plan. All mines operated well in their plans, if not better on their plans. And certainly a little bit more weighting of the open cuts to the second half than there is in the first half. Narrabri, as you know, goes through a long wall changeup in this half. And Vickery is ramping nicely. Queensland side of things, again, 9.9 million tonnes. This bears well compared to traditional performance of these sites. So I won't dwell on that too much, but both sites doing well. Blackwater certainly doing better. And Dornier certainly showing some real signs of improvement here, which is very nice. And numbers in the first half, which they haven't seen for many years. So that's very, very encouraging. We're excited to see where we can take this in the year. But in aggregate, ROM and sales certainly pointing towards the upper end of our guidance range. With that, over to you, Kevin.

Yeah, thanks, Paul. So let me start with earnings for the half year. We reported $960 million of underlying EBITDA. The DNA side of that, we've given you some guidance in the back of this pack on how that will run for the rest of the year, because I think that's... point of education, was $340 million, which is $107 million for the New South Wales business, which most people understand, and then $233 million for Queensland, which reflects amortisation of acquisition costs. We had an underlying net finance expense of $151 million, which is about $100 million relates to the interest payments on the US $1.1 billion credit facility, and the balance of about 50 is drawn from leases. interest charges on provisions as they unwind and an amortisation of upfront fees. And that gets you to an underlying income tax expense of about 30% or $141 million, which gets us down to $328 million in NPAT There were $22 million of post-tax transaction and transition costs. And this is predominantly IT systems and some restructuring redundancy costs as we optimize the Queensland operations. When we stood SAP up in Queensland, we stood it up in five months and we naturally understood that this was gonna take a little more work to flesh that out over the balance of fiscal year 25. So that's what you see in that number. And the followers of Whitehaven will know that we now have US denominated debt, cash, on our balance sheet and deferred consideration to BMA, they're all expressed in US dollars. So as the Australian dollar fell from about 0.66 at 30 June 24 to about 0.62 at 31 December, the US dollar denominated cash and debt needed to be adjusted to that current rate. And that's what really led to the underlying non-cash. There were also discount unwinds on the deferred consideration and the contingent consideration. And you can see all that set out in note 4.2 to the financials, which will give you all the detail. But once again, they're all non-cash adjustments. And in years to come, as that Aussie bounces around a little bit, you'll see that come through in these adjustments to underlying financing costs. Over the page onto slide 16 and looking at the five-year financial graphs, you really can see that FY22 and FY23 were years that enjoyed record thermal coal prices. But arguably the first half of FY25 represents a more average pricing outcome, albeit that we think met coal market was relatively soft. We've said we expected the GCNUC to be fairly resilient in that $120 to $150 range, and it was in half one FY25 at US$139. But the PLV hard coking coal index averaged 206 for the first half, and we believe that's soft, relatively speaking. So with a half-year underlying EBITDA of $960 million, or close to $2 billion annualised, you can see the significant scale benefits coming through from acquiring Dornier and Blackwater. With met coal revenues accounting for 64% of our revenues, you can see the acquisition has provided Whitehaven with substantial diversification benefits. And this is in a year when Whitehaven has temporary higher costs. As Paul flagged, and I'll talk you through this cost position in the next slide or two. So what this means is these results are translating well into cash generation, and that really does put the board in a good position to reconsider Whitehaven's capital allocation framework at the end of FY25. Of course, we see the proceeds from the sale then of Blackwater coming in on the 31st of March. That US $1.8 billion will help with the balance sheet and increase flexibility. And our net debt position at 31 December of about $1 billion will soon reduce when that US $1 billion comes in. And of course, we still have to make that first of the deferred payments to BHP and Mitsubishi on 2nd of April, 25. So segment results on the next slide. On a revenue basis, Queensland contributed $2 billion in the first half, being close to about 60% of our overall revenues. So this is, again, the scale benefits coming through. And the EBITDA contribution from Queensland was $588 million compared to $395 million of EBITDA from New South Wales business. The first half of financials show me the benefit of the diversification in product and in markets and of the increased scale of Whitehaven's business. And we did all that without issuing a single Whitehaven cost share. We know we can do more in the years to come as we continue to simplify and reshape the Dornier and Blackwater mines. Over the page, we're giving you the EBITDA margins. A $67 a ton margin on 14 million tons of sales is attractive. But there's a lot going on in this slide, so let's try and have a closer look. We think we can continue to improve our costs, I think we keep saying that, and our revenues. At the group level, we realised an average price of $232 a tonne for half one fiscal year 25 and a unit cost of production of $137 a tonne with an average realised royalty of $27 a tonne. In Queensland, royalties averaged about 13%, while in New South Wales, the average royalty rate is closer to 10%. I would say to you that on the cost side, when we set guidance at 140 to 155, we knew fiscal year 25 would be a higher cost year. And we'll talk through that. You can see those New South Wales operations points at the top of that slide. So Dorney and Blackwater both delivered first half results that we're very pleased with. We've got productivity improvements coming through at each operation. and there remains room for further improvement. We're on track with our plans to reduce costs in Queensland at the annualised run rate of $100 million per annum by the end of this financial year, and we're seeing cost efficiencies coming through from streamlining operations, including reducing duplication, reducing travel and accommodation costs associated with fly-in, fly-out workforce. We're also seeing improvements in maintenance programs and in scale and other benefits from procurement. At Blackwater, we're rebuilding blasted inventories and we're rebuilding pre-strip inventories. Both these initiatives are expected to support productivity improvements and more sustainable production volumes in the future. As Paul said, in New South Wales, we are in a higher cost period, but we expect to see improvements. And on this slide, we provided you with additional context and timing around that. New South Wales volumes and unit costs in the first half reflect current mine sequencing. We're mining through the hill at Tarrawonga, which comes with a higher strip ratio, and that'll continue into next year. And as you know, we're digging the box cut at Vickery as part of early mining, so costs are naturally higher at Vickery for a few years. In the first half of this year, we had a strip ratio at Malls Creek that was about one turn of strip higher than our full year, so we expect the second half from Malls Creek to be contributing to the lower strip ratio. We've talked about incurring additional port and loading charges at NCIG as the shareholders agreed to increase those charges so that the NCIG could accelerate its debt amortization. Across New South Wales, these charges, we're paying an additional $4 a tonne. And once the senior debt is fully amortized, which is around fiscal year 30, we would expect about $9 a tonne to come out of the New South Wales cost base. And finally, as we close Warris Creek, and volumes that existing mines have moderated, we've seen unit costs increased because of underutilized take or pay costs on the rail and port. We're in the process of renegotiating our New South Wales rail haulage contracts to better align with our actual volumes. And when we do this, we expect New South Wales unit costs to reduce by about $3 a ton in fiscal year 27. We see this as temporary. On the port side, over and above the NCIG debt amortization, we're seeing about $2 a ton of additional costs because of underutilized take or pay volumes. We don't expect this to change much until we see volumes from full-scale victory or the volumes lift from the existing operations. So I hope that gives you a bit more colour about those costs. Come over the page onto EBITDA in the first half. I love this slide because this really tells me we had 632 million in EBITDA in the New South Wales business in first half of fiscal year 24. And with coal price change, with sales volume costs, that fell by about 236 million. But with the Queensland acquisition, we've added $588 million of EBITDA, and that's gotten us to this $960 million for the half year. Net debt of $990 million. At the start of fiscal year 25, we had a net debt position of $1.3 billion. And by the end of the first half, we had about $990 million. So cash generated from operations was a solid $922 million. And we paid $110 million in interest. We received a tax refund of $12 million. We paid a total of $245 million in capex and other acquisition costs. That's a combination of a couple of things. We bought a seat at the table at DBCT. That cost us in the early 20s. And we made $16 million payment to EDF for the final payment to EDF for the acquisition of the 700% in Narrabri. And again... We paid $104 million to shareholders, being the 13 cent final dividend in FY24. There are about $160 million of loan repayments, ECAs and lease payments. And then there's a little bit of tidy up there in the foreign exchange. So we finished at $9.89. That $9.89, I'd expect when we get the billion and 80, that will be quite strongly placed. So liquidity, I'm confident there are a number of people who've been running around in a softening coal price with a view about liquidity in this business. But I'd say we're lightly geared. We're prudently geared. We maintain a strong balance sheet. And historically, and since we acquired Dawn Air and Blackwater, we've maintained sufficient liquidity to comfortably meet our commitments. And with the receipt of the proceeds from settling down the 30%, our liquidity will again improve. Our leverage on a trailing 12-month basis is less than half a turn of EBITDA. In the second half of fiscal year 25, we paid the $363 million of stamp duty on the 2nd of January, and we'll have a little bit of tax to pay on this Blackwater sell-down, but we're well positioned to do that. Somewhere in 26, I'd expect us to reposition our funding sources and structures over time to take advantage of What you see is a really strong balance sheet, strong leverage, strong gearing, and strong liquidity. So we've got great relationships with capital providers, and we'll look at that in 26. Let me hand back to Paul to comment on the capital allocation framework.

Thanks, Kevin. The capital allocation framework is serving us very well, has been consistent for many years now, as you know. This slide is familiar to all of you. And it underpins the disciplined approach that we've taken to sustaining and growing our business and returning capital to shareholders, be that through dividends and buybacks. As I mentioned earlier, today the board has declared a $0.09 fully franked dividend and an equally sized in dollar terms buyback to be executed over the next six months. As we've mentioned before, The board will be reviewing in its entirety the parameters within the capital allocation framework. The framework itself we're very happy with, but the parameters in terms we set the payout ratios and so on, as we previously said, we'll review that in full at the time and release that to you at the time of the full year results for this year. That process remains on track. But, of course, the sell-down opportunity and confirmation of the timelines for that did give the board the opportunity to reinitiate the Viabac at this earlier juncture. Again, the dividends, first half to second half, our usual practice is to be a little lighter in the first half. The board likes to see the full cash generation from the business and wants us to get an eyeball on the full MPAT outcome. And so, again, we'll be a little lighter in the first half versus the second. Just back on the payout ratios, that's 37% of the underlying MPAT for the 9 cent dividend, 22% of the underlying MPAT of the entire group. If you add the buyback of $72 million in there, then the payout ratio is 44% of the underlying group MPAT for this half year. Just moving over to guidance quickly, nothing much changing here. Guidance remains as it was. with one exception, of course, now with the confirmation of the joint venture formation. There's a small adjustment to equity coal sales to take into account, obviously, the formation of the joint venture on the 1st of April, where we obviously only retain 70% of Blackwater for the balance, or for there on in, but for as far as the quarter goes, the remaining quarter of our guidance. So there are some small adjustments for you there to take into account. um as it relates to equity coal sales now there are small adjustments also there on costs of coal and also total capex but we view those to be relatively modest in the context of things so we've just left those the way they are but there will be some small there will be some small adjustments to the good side of that both those metrics as we get to the end of the year And I'll just take you to our focus for the balance of FY22 slide. Now this again, this is a little busy, so I'll get through it. Just bear with me. There's lots going on in the business as you can tell, but I hope you get a sense that just from the discussion with capital allocation framework and what we've done in this six month period, we do keep an eye on the wood for the trees, but this is indicative of the amount of work that's going on in the business today. And she would expect that that's the case, given the size and change of the business. Delivering safe and productive operations is absolutely our focus, both in New South Wales and Queensland. We need more consistency in that front, and I know we can drive our safety outcomes down, as we said earlier. Costs out and issues in Queensland are going well, as Kevin mentioned, and we remain on track for the $100 million reduction in our Queensland cost base on a run rate basis as at 30 June. That's how we'd like to enter the new financial year. Ramp up in Vickery is going well. We're preparing well for the change out at Narrabri. And the one thing we haven't been able to get to, so my apologies for that, is that we did say we'll be revising our stage three CapEx for you, but that will be a little bit delayed for a month or two. And the only reason for that is just that we're obviously going through the motions with our friends in our joint venture. So there's more people involved in that process than just ourselves, as you understand. So we'll just need a little bit more time Just to bottom that out. But I can tell you that there are hundreds of millions of dollars reductions in capital there, whether they be absolute reductions and also deferrals of capex as well. So that's that we very positive. We'll get that to you shortly. As far as the products go, Blackwater and Dornier, as I mentioned earlier, the qualities of the products as published previously have been revised and we circulate those with customers and that's getting a very positive reception. So we do expect to see realisations improving. Over time, obviously, as I mentioned in the last call, the customers who already have the call understand what they're getting. And we're obviously just having a discussion with them about paying for all the benefits of that. Whereas new customers, the conversation starts at a different level. And so we are seeing incremental change there in realizations with new customers and also with the existing as well. At a group level, there are lots of things to be done there. Obviously, IT and internal reporting, there's lots of things going on as we bring the business together. The business is still on two different systems as far as the IT goes, New South Wales versus Queensland. We will address that over time. And completing the sell-down of the joint venture formation for Blackwater, that's very exciting. The 31st of March is now the date confirmed for all to see. But there's a little bit of work that's required from on our side just to make sure that all comes together, you know, joint venture formation, reporting and so on that goes with all that. So we're well onto that. But overall, I'm very pleased with what's been a very good and strong first half of the year. We've set ourselves up well for the full year. As I say, our guidance is tracking to the better end of our guidance on pretty much every dimension, which is very positive. And it's nice to have turned the corner to the second half with some good results behind us. The capital allocation framework has allowed us to draw in some flexibility to that. So I hope that's welcome news to our shareholders, but we will remain diligent and to drive the outcomes and cost reductions that we expect and to make sure that we generate the maximum returns for our shareholders over time. So with that, I'll just thank our people for the hard effort they've put in this year, the board for its support, and shareholders for their ongoing support of the company. So with that, I'll hand back to the operator for the Q&A session. Thank you.