Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yancoal Australia Ltd (YACAF, Financial) reported a significant increase in production volumes, with ROM production up 7% and saleable production up 18% compared to the first half of 2023.
- The company generated strong financial results, including $3.14 billion in revenue, $990 million in operating EBITDA at a 32% margin, and $420 million in after-tax profit.
- Yancoal Australia Ltd (YACAF) maintained a robust cash position, holding over $1.5 billion in cash at the end of June 2024.
- The company has a proven history of growth through acquisitions and is well-positioned to pursue potential corporate initiatives with its retained cash.
- Yancoal Australia Ltd (YACAF) has implemented successful safety and sustainability programs, including the publication of its first sustainability report aligning with international standards.
Negative Points
- Realized coal prices were lower than in the first half of the previous year, impacting revenue despite increased production volumes.
- The company did not declare an interim dividend for the first half of 2024, which may disappoint shareholders expecting regular returns.
- Cash operating costs were higher than targeted at $101 per tonne, although they are expected to decrease in the second half.
- The company faces ongoing challenges from weather-related disruptions, which could impact production volumes and costs.
- Market conditions for metallurgical coal remain under pressure, with reduced demand observed in key markets such as China and Japan.
Q & A Highlights
Highlights of Yancoal Australia Ltd (YACAF) Earnings Call
Q: Could you provide the production profile for MTW and Hunter Valley Operations this year?
A: We don't normally break out our mine-by-mine production data. We look at the group as a whole and report on the performance of the mine collectively. (David Moult, CEO)
Q: With the production ramp in the second half of the year, do you expect the full-year cash operating cost to be at the high end of the cost guidance?
A: We are confident the second half will be very strong. Our unit costs are driven by volume, and we expect to be well within the range of our guidance. (David Moult, CEO)
Q: How do you prepare to achieve your production volume targets given the above-average rainfall in Australia?
A: We invested significantly in water storage and pumping facilities, which have helped us manage higher-than-average rainfall events. We are confident in dealing with rain better now and expect a strong second half of the year. (David Moult, CEO)
Q: Could you share your view on the global thermal coal and metallurgical coal price trends in the second half?
A: The thermal coal market is balanced with little volatility. We don't see significant changes in demand and supply. The metallurgical coal market is under pressure but holding up. (Mark Salem, EGM of Marketing)
Q: What is the company's dividend policy, and why was no interim dividend declared?
A: The dividend policy remains unchanged at 50% of free cash flow or NPAT, whichever is higher. The decision not to declare an interim dividend was strategic to prepare for potential corporate activities. (Ning Kevin Su, CFO)
Q: What are the potential uses of the retained cash if not utilized for corporate initiatives?
A: If opportunities do not materialize, the cash may be returned to shareholders through dividends or other means. (David Moult, CEO)
Q: Are there any expansions or potential expansions within the existing portfolio of assets?
A: We have organic opportunities, such as increasing the reserve base at Moolarben and exploring an underground operation at Mount Thorley Warkworth. (David Moult, CEO)
Q: Do you have any preference for metallurgical or thermal coal opportunities going forward?
A: Our preference would be for metallurgical assets to balance our portfolio, although we also look at thermal assets. (David Moult, CEO)
Q: What is the company's capacity for strategic initiatives in terms of dollar value?
A: We are in a strong position to finance opportunities, given our debt-free status and strong balance sheet. (David Moult, CEO)
Q: Will there be any alternate activities considered, such as a buyback, if the cash is not utilized for corporate initiatives?
A: A buyback is not being considered due to free float and liquidity concerns. (Ning Kevin Su, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
