New Hope Earnings: Lower Thermal Coal Prices a Headwind, but Still a Solid Result

No-moat New Hope’s fiscal 2024 first-half result fell materially on last year's but was broadly in line with our expectations. Adjusted EBITDA of about AUD 430 million declined 60% on the same period last year, driven by lower thermal coal prices. Average prices of AUD 197 per metric ton were 58% down on last year, which more than offset higher coal sales and lower unit cash costs. The AUD 0.17 fully franked interim dividend to be paid in May was higher than we expected, and we now forecast total 2024 fully franked dividend of AUD 0.34 per share, up from AUD 0.27 previously. This represents a forward yield of 7.4%. Given the 19% discount to fair value at which the shares trade, we think share repurchases would be value-accretive and worth consideration. However, despite a strong balance sheet, with net cash and liquid investments of roughly AUD 400 million, New Hope currently prefers dividends to buybacks, given the legal uncertainty over its New Acland Stage 3 mine in Queensland. Environmental groups continue to oppose New Acland. While we think they are unlikely to prevail, until this issue is resolved New Hope’s capital management policy seems sensible.