Net write-downs of $12.3 million eroded overall performance and coal sales were down 12% year on year to just $2.7 million for the half, which stands in stark factual contrast to the upbeat commentary from the company, it said.
“New Hope references its relative financial health given net operating cash flows of $50 million in the half year, but this is before sustaining capex and exploration expenditures of $51 million, meaning free operating cash flow was actually negative $1 million before funding $50 million of shareholder dividends.
“As such, as in the prior half period, dividends were funded by running down cash reserves rather than operating cash flow.”
In reporting a marginal net profit for the half, New Hope Corporation is one of the better performing global coal miners, IEEFA said.
New Hope management quotes Wood Mackenzie forecasts for global seaborne thermal coal markets to nearly double over the 2015-2035 period to 1,600 million tonnes per annum.
“However, with the [40%] acquisition of Bengalla, the company has expended its financial strength of an $1 billion net cash position (which was almost unique versus its peers). As such, the share price is likely to be more aligned with its coal-mining peers in 2016,” IEEFA said.
“New Hope, in short, will be hoping the coal demand outlook that Wood Mackenzie paints is correct, notwithstanding their forecast errors of the last three years.”