Whitehaven Coal Limited

Thanks very much for taking the time to join us for the half-year results for FY26 for Whitehaven. I'm joined here as usual by our CFO Kevin Ball and our COO Ian Humphreys and we'll work our way through the presentation highlights as usual and then get ourselves across to the Q&A section of today's format. Over the page I should bring your attention to our disclaimer as usual. We do have forward-looking statements in these presentations as a matter of course. So I'll bring that to your attention for the obvious reasons. And I'll move over to the highlights and I'll start by saying, look, the company, as you know, for those who've been following the quarters, we've had a good first half here. We've laid down a pretty solid foundation for our first half of the year and sets us well up for the second half. Now, I'll start with a couple of these important highlights, which we always do with safety and our compliance. Safety has been very good at TRIFRA 2.9. Now, we all know that moves around month to month a little bit here and we finished the year at 4.6 but at 2.9 that is an excellent result so all kudos to the team for looking after our people and making sure we're on this pathway to minimizing instances and injuries in our business. Now we all know also that it's been a wet six months in various states and so despite that our compliance has been very good so we've had no No enforcement action events at all during the last six months, which has been very positive for us also. So again, kudos to the team for keeping that up despite some weather variation, particularly in Queensland, which we'll talk to a little bit later. Over to the highlights. The operational performance has been good, as you know. 20 million tonnes has been a very nice way to set the platform for the second half of the year. Queensland at 10.3, New South Wales at 9.7, both very good results. Equity sales at 12.8 million tonnes has been strong, so that's very positive. Lower than the first half last year, but of course Blackwater is now 70% of our numbers on an equity basis rather than 100%. At a group level, we've averaged a price of 189 Aussie per tonne, which includes 212 for Queensland and 168 for New South Wales. Cost base has done very well, so $135 per tonne, as we alluded to, obviously, in the quarter. That is now a confirmed number, as you would expect. So we can talk a little bit about that and the fact that we feel that there's upside in that also. Revenue of $2.5 billion, 54% metallurgical coal, 46% thermal. Thermal being a strong component of the sales mix in the first half, and we can talk a little bit further about that In a moment, the underlying EBITDA for the half at 4.46 was actually a pretty good result. We have recorded an underlying net loss for the period of $19 million, and the statutory net profit after tax is actually $69 million, and Kevin will go through a bridge that helps you walk your way from one to the other shortly. We are in a good position. The balance sheet is in good shape and the markets actually improved since Q1 and Q2 have come to conclusions. So the board has seen fit to declare a dividend, an interim dividend of $0.04 fully franked per share. And we're also going to commit up to $32 million of a buyback of equal value over the next six months. Now of course those who are doing the math will work out that when you consider on a whole of year basis, which we do when we calculate the payout ratio, given that we're seeing better market conditions in the second half, we're likely based on where things are pointing to be at the top, if not slightly over the payout ratio, just given the fact that we are declaring a dividend at a point when technically the policy says we don't have Therefore, we don't pay a dividend, but we're doing that based on our confidence in the balance sheet strength and also obviously the underlying market improvement that we'll see. Now, just to go over that market, those market conditions, if I could for a little bit, as I said, Queensland average revenue $212 has softened. New South Wales has softened also, an average of $168. Aussie for our revenues out of New South Wales. The average for PLV across the period, 192. So that certainly started lower and has improved. So we did finish at $212 for the end of the half, which is a positive sign to see. The new price also did a similar sort of thing with average 108, but it varied between 104 and 112 for the period. And we have seen since the half-year end an improvement on both sides of things. Now, it's not streaking ahead. We saw some... Perhaps some frothiness as a result of weather-related activities in Queensland, so the POV spiked up to 250 and has eased since then, but these numbers are both much better than what we've seen over the last six months, so that is very positive for us. Supply-demand feels pretty good. Our customers are wanting the coal, and so there's no concerns on our side at all in terms of moving our valuable product, so it's nice to see customers taking option tones as well. We'll look over onto the next page and look at the benefits of the enlarged group and the diversification of our markets and our products. It looks pretty good. 93% of our revenues are actually in Asia, which is no surprise, I'm sure, to everybody. But you'll see a concentration of markets there in Japan, India, South Korea and Malaysia round out the top four of our revenue. But more generally, it's the right place to be from a growth of coal consumption perspective. And so we're well positioned to take advantage of that. As I said there, the metallurgical coal and thermal coal mix being 54-46 respectively. A little bit lower on the next coal side in the six months, just because we did have some very good coal production at Narrabri, as you know. And so that put a bit more coal into the first half for the thermal side of the equation. And that will bounce out in the second half. But it's certainly very positive and feel like we've laid a strong platform for the second half. Speaking of recurring slides, this slide, when I move over to the underlying supply demand outlook for both the thermal and the met with the high CV thermal and met, no change in our position there. This gives us confidence that we should continue to push forward and grow and invest, acknowledging that we do have structural shortfalls on both sides of our business. So that's a very positive, but nothing that we can see points to any change in that dynamic at all. Moving over to operational results. These numbers I know you've all seen by virtue of the quarters that have gone before, but for those who haven't been watching this closely, as I say, we've rounded out a very good result for So ROM 20 million tonnes, 10.3, 10.4 if you look at the slide with the rounding for Queensland, 9.7 for New South Wales. The sales actually, as I say, we had a change in our mix there just in this half because of strong New South Wales sales. So sales New South Wales 8.5 versus Queensland 7.8. So that does change the mix a little bit for you, but that explains the 54% of met coal revenues just in this six months, as I say. The second half we'll see that turn around. but overall managed sales of 6.2 million tonnes is a good start to the year. Queenslanders, as I mentioned, excuse the rounding, there's 10.3 as opposed to the sum of those two, which is 10.4, but we're very pleased with the results there. Blackwater, 7.3, good result, and Dornier at 3.1. And these are all in the context of what's been a wet start to the year. So I think looking at those numbers, that's a solid beginning for this financial year. That's not to say New South Wales didn't have some weather either, it did. So I think that's very, very interesting given that Maribyrn has had a very good contribution to the total numbers of 9.74 in New South Wales. Gunner, their open cuts are doing what they need to do. Moors has a higher proportion back end to the second half of the year than we have in the first half. making great efforts to try and smooth that out month to month, but we do have a little bit more tons coming in the second half than we do in the first. And as a result, we've got a little bit of a spewing there. Otherwise, we're happy with the cost reductions. We'll speak to as well, but we're well on track to deliver our $60 to $80 million out of the business by the year end. And overall, we feel pretty confident about where we've been and how we set ourselves up for the second half of the year. So with that, I'll hand over to Kevin. We'll deal with the financial side of things.

Thanks, Paul. So I'm over on slide 15, and it's the Ibida Bridge from half on FY25 to half on FY26. And not surprisingly, this tells me what happened, which is really prices were soft. So a $35 margin. or a $35 reduction in price, together with the volumes that we saw when we sold the 30% of Blackwater out of the quarter, contributes to the $552 million decrease in sales volume and price. Costs, $2 a tonne, $2.50, I think a round of down to two, better. We had a few headwinds in the costs in the first half, mainly from queuing at all the ports. So we had a strong build of low cost production in December. So that should come out in the second half. And they've masked the underlying improved cost performance and held the cost improvement to that couple of dollars a tonne. So in half 1.26, we reported an underlying EBITDA of $446 million. And I think what I see out of this is that calendar year 25 was the cyclical low that we've seen in the market, and that's, as Paul alluded to, an improving price scenario in the second half of FY26. If I take you over the page, you can see the segment result. between New South Wales and Queensland and reconciling to the group. On a revenue basis, met coal prices were a bit softer in the half than thermal coal. So Queensland contributed 1.3 billion and a half, which was 52% of overall revenues. New South Wales and thermal coal prices recovered a little earlier than the met coal prices and so New South Wales had 48% of revenue or 1.15. The half-year EBITDA contribution from Queensland of $248 million showed the effect of those lower coal prices, while New South Wales delivered $215 million in EBITDA. In Queensland, with acquisition accounting attributing a large proportion of the acquisition value of the property plant equipment, the depreciation charge in Queensland was $147 million, while there was also $36 million of amortisation. The fixed depreciation costs of this low... in the coal price cycle have an outsized impact on NPAT at this point. So better prices and that impact will be lower. Underlying net finance expense of $135 million, it largely reflects the interest on the $1.1 billion term loan that we used to complete the acquisition of Blackwater and Dornier. But as we say, we're planning on refinancing that debt in this half. And then there's a small income tax benefit of about $6 million, which you'd expect off the $25 million underlying loss before tax. If I take you over the page on costs, I'm going to say I'm pleased with the costs in the first half, given the headwinds that we had in terms of weather and ports. I'm pleased, and I think Paul's going to talk about the $60 million to $80 million that's coming in cost outs, and we're across that. But at a group level, we realised an average price of $189 a tonne for our sales, and those tonnes that we sold cost us $135 to produce. We paid both governments an average of $20. It was a bit more in Queensland and a bit less in New South Wales. But in Queensland, the low point in the cycle, that average royalty rate was about 10.6, while in New South Wales it's around the 10% level. If I look at where we're up to in the first half, we're tracking at the bottom end of guidance. So that's a good thing. That 135 is at the bottom end of guidance between 130 and 145. And as I said before, costs in the half unfavourably impacted by higher vessel queues in all ports for a portion of the half year, and strong production levels in Q2 meant that low-cost production was held in coal stocks at 31 December. We also have a little impact here by the higher percentage of sales from New South Wales than previously, and impact marginally because we had less blackwater tonnes in the sales mix this quarter because of the 30% sell-down. So margins in the half for December were 34, which is about half the margin we earned. in half one FY25, but it's just consistent with the coal price environment. Moving forward, we have a new above-rail haulage contract kicking in in July, so we expect to save $3 a tonne around that, and we're continuing to accelerate the amortisation of additional charges at NCID to accelerate their amortisation of debt, and we should see that fix itself late in this decade. Turn the page and I'm sure everyone wants to understand how we get from an underlying net loss after tax of 19 to a statutory net profit after tax of 66, or 69 rather. So we reported $446 million of underlying EBITDA on the half, which is an improvement on the half to FY25, which you would have seen in the previous slide. Group DNA, $336 million, outsized relative to EBITDA, but that's to be expected given the coal price period we've come through. And an underlying finance expense, we've talked about $135 million, and we can give you the break-up of that in some slides in the appendix to this pack which you've got. The non-recurring items totaled $88 million. The largest portion of that was when we reset the deferred contingent expectation of what we're going to pay BMA as a result of the price movement. And I think in there as well, there's a $34 million technical tax accounting around de-recognition of deferred tax liability relating to expiration as part of the sell-down. Sure, if you want to ask me questions about that outside of time, that would be lovely. Net debt. I've got to say, I'm really pleased with this. We came through this half really well, I think. You know, the... The capital allocation framework really helps us in this process. If you look at us, we've spent $157 million on CapEx, so we're sustaining the business. So we maintain the productive capacity of the business through the bottom of the cycle. We return $93 million to shareholders in the form of buyback and dividends. And we spent $39 million on other investing, which is really a little bit around the rear-earth side of the world. And we finished the net debt balance at 31 December 25 at 710. On any view, when we turn the next page, you'll see that Whitehaven's balance sheet is particularly strong. So we have... Strong balance sheet, low levels of gearing, about 11%. A low level of leverage on a trailing basis, about 0.8 at the bottom of the cycle, which is really good. And we kept $1.5 billion of liquidity to ensure that there was no doubt that we could comfortably meet our obligations. We've been saying this for a while. Since we sold down Blackwater, we've kept the cash reserved to meet that second payment to BMA. So the $500 million that's going to be paid on the 2nd of April is sitting on deposit. And the coal price contingent payment structure associated with that acquisition has been working as intended. We paid $9 million to BMA in July, and we're, at the current moment, I'd say the number that we owe calculated is about $20 million US, but it's lifting in this quarter with rising prices. But, OK. We're working to refinance our $1.1 billion acquisition facility, and we're just looking at lower costs. When you look at how the company's positioned, it's... It's a really strong credit, probably one of the best coal credits around, but the finance acquisition was a piece that we put in place. Now we want to put that in with a piece of debt that befits the quality that we have. So let me hand back to Paul for the remaining of the slides.

Thanks, Kevin. Just back to the cost side of things again, as Kevin was saying and said earlier, we feel confident we're going to be able to deliver our $60 million to $80 million in savings by year end. This just gives you a little bit of colour in terms of where we're finding the opportunities within the business. Being split state to state, we think there's going to be about 60-40, more or less, if I divide it between the two states, and that slides back a little bit because all parts of the business have to contribute, not just the sites, but obviously the officers as well. and so we are finding opportunities across all areas there. Now just to give you a bit of colour, obviously the organisational structures of the business continue to be aligned to a Whitehaven model, so we're seeing changes there in the operating model as we drive consistency across the business between the various operations. We're seeing upside in terms of maintenance strategies across our larger assets in particular, with obviously there is a big level of mechanical intensity there and obviously there's a lot of money being spent on maintenance. So that is fertile ground in terms of optimizing that. In New South Wales we have been moving equipment around to make sure that the implement is best deployed in the space where it can be best utilized. Tyres and things like that, we're certainly seeing the opportunities for improvements there. Some sites there's good transfer of knowledge between sites in terms of how we're doing well with tyres on some sites and benefiting others. And of course, there's a major contracting arrangements have been reset and adjusted as a result of the opportunity, not just with scale, but also just the parts that we've inherited. We're changing those as we go along. And so we feel that we're in good shape to be able to deliver on our commitment here for $60 to $80 million by the financial year end. I'll turn over the slide which is entitled the Queensland five-year FOB cost estimate suggested for inflation. This is really a commitment we made to you that we would go back. As you would imagine, we should in any event which we have been doing, which is an acquisition of this size, you know, a post-implementation review should be done and this has been part of that. So, we knew all along that the estimates we put out at the time of the acquisition obviously were based on the work we were capable of doing during the due diligence phase, which generally has worked well and little surprises have come out of it, so quality work was done. But inflation has done its ugly work for the business, so we called that out and we said that we were going to adjust it at this half year and reset these numbers, which we are now doing. So definitely when we've gone back and looked at purchase price indices and obviously wage inflation indices, there's about $10 in that. So coming off the 120 average base, if you like, for what we gave you as the five-year averages at the time of the acquisition, you should add $10 in there in terms of inflation. And then learnings and observations that we've made since, as I say, in that post acquisition review, There are a number of observations that we can see that have changed the cost base and I'll divide them if I can into temporary and then permanent matters. So I'll go through the bullet points that we've got there, but I'll firstly deal with the temporary ones. As you all know, we are definitely working hard to reinstate a comfortable level of stripped inventory that we feel like we should have in order to run at a higher degree of operation. Now we've been producing higher than what the mine has historically been doing in more recent years, so we are consuming the stripped overburden in advance at a higher rate. So this is going to take us a little bit longer than expected to do that. This is a high quality problem, I have to say. But until we get to that point where we're satisfied that we have an inventory of strip ground enabling the efficient deployment of drag lines and obviously the elimination of downtime, whether it's been parked up because the bench is not ready, we will continue to have this effect in our business and relatedly with that, there's a higher degree of re-handle that goes with the drag line fleet whilst we're in that situation. So that is a feature which we'll have for a little while yet to go. Look, the other thing we've observed, and that's just part of experience now, we certainly observed the backlog of maintenance that's needed to be done. And so the major shutdowns for the big implements, you know, so the drag lines and shovels in particular at Blackwater have certainly featured and it's important work and obviously not work you can do with any great detail. You can review the records and so on, shutdowns and things in the DD phase, but we found that we've We've needed to put some more money into that. And there are other examples of that. The Crestfall, say, for instance, we had to do quite a bit of work on them to ensure that utilisation has improved. It has improved dramatically, which is very good, but that has required some work to get that fleet into the right shape and fit for purpose. The AHS isn't, we had assumed, a better level of productivity from AHS at the time of the acquisition. It's not there yet. And so we are working with CAD on that and we are pushing hard to ensure that we can get to a level of satisfaction with the productivity across the autonomous fleet that we think it should be. Now, the summary of those ones, those four features I've just mentioned, they're the temporary ones. A couple of which are permanent, more in nature. The same job, same pay, that is definitely an adjustment. That was obviously occurring at the time of the acquisition. And so we weren't able to size that. Now, we have embedded that in our business now. Sadly, the cost of labour is going up as a result of all that, as everybody well knows. So that is influential in our cost base, as is the higher level of demurrage, in particular out of Dahlia, but certainly Blackwater as well. The Queensland logistics chain does not work with the efficiency that we're accustomed to in New South Wales. I'm sure no one will ask me to say that if you're a Queenslander, but that is a fact. And so the assumptions on demurrage have been adjusted accordingly. Now, the cost base 135 that we talked about, very happy with that. Even given, as Kevin mentioned, the delays in ports and shipping in logistics in Queensland in particular, that 135 does include a couple of extra bucks there just for those influences, which should unwind, that part of it should unwind. But the reality is demurrage is going to be higher than we budgeted for in Queensland. So those are the two permanent ones I want to call out, the four preceding were temporary in nature and will be alleviated as we continue to drive. So as a result of all of that, we're now giving you a range, I reset that range, 24 to 28, obviously there's only a few more years left in this, of 140 to 145. We've been doing well on cost outs, as everybody understands, with the business since we've acquired it. And we're only six or seven weeks away from crossing the second anniversary. So I feel like we're making really good progress there and we can get ourselves down to 140 in this period. I think that would be an excellent outcome. That's not to say we stopped trying because, as I say, the first four aspects of that I've mentioned are temporary. We consider those to be temporary in nature. And so we'll continue to push forward and drive greater productivity and lower costs as a result. Now over to the capital allocation framework. Nothing new there for you encompassed in this. This has served us well and we feel confident that even in this instance, so again if you were to apply this framework slavishly then we wouldn't be paying a dividend because we have an underlying Net loss, minor as it is, it is one. However, reflecting the balance sheet strength that we have and the improving market environment that we're experiencing, we feel confident to recommend to our board that we pay a modest dividend and the board has accepted that proposition and declared the four cents as we've mentioned earlier. So four cents fully franked is a modest dividend, reflective of the fact that we come through the bottom of the cycle, but paying a dividend through a period that represents the outcomes from the bottom of the cycle, I think is a very good outcome. And of course, we're aligning that with an equal sum of our buyback over the next six months, up to $32 million with a total of $64 million in dividends and buybacks out of the first six months, which again, I think is a solid result. Over to guidance. Look, you can see we're tracking well in our guidance. Certainly ROM targets to do 20 in the first half. The upper end of our group guidance there obviously at the managed level is 41. You know, we would dearly like to make sure we can get close to that, if not surpass it. So we feel like we're in good We're in good shape. The challenge here, of course, is, of course, weather, and that's the major caveat, but otherwise we feel we're in decent shape. The last quarter you saw a run rate of 11 million tonnes in the quarter. We're carrying that momentum into the new quarter, so it's nice to see things moving along, which is very positive. The costs, as I mentioned earlier, and as Kevin spoke about, we've seen good progress on the cost side of things. And 135 out of a half that was weather affected and had some extra costs in it, I think is really good. And we can see when month to month, when we're doing the sales volumes and production volumes that we expect, we can see the upside associated with that. And so we feel positive that we can drive our costs down to the lower end of the range if we hit that top end of the run production. So we feel pretty good about that. CapEx, as is our way, we're spending a little bit less than the range we've given you. So at 157 for the six months, I'm sure there will be a little bit of extra capital come out in the second six months as people want to finish up projects and so on. But we're tracking, obviously, to the bottom of that range. And so, again, that is reflective of a bit of history, I suppose. But the conservatism that we've brought into our guides will continue to apply. But overall, no change to our guidance, and moreover, we're tracking to the right end of the top end, and we're tracking to the lower end of costs, which is very positive. But overall, good solid six months, and we're looking forward to the second half. So I think we're in decent shape. So with that, I might hand back to the operator, and we can get some questions going.