Coal miner New Hope Corporation is bracing for extreme volatility in the export market to persist for some time yet, as a coronavirus-driven global glut keeps coal prices stubbornly low.
The company on Tuesday revealed it had slumped to a $156 million full-year loss and withdrew its dividend after a series of hefty writedowns across many of its assets. New Hope said it was facing delays in receiving approval for its New Acland mine in Queensland’s Darling Downs and has been forced to cut nearly 200 jobs as a result.
New Hope’s 69 per cent profit fall on an underlying basis, from $384 million to $119 million, comes as the COVID-19 economic slowdown weighs on global energy demand and the price of coal, one of Australia’s largest commodity export. The benchmark price for top-quality New South Wales thermal coal has plummeted from $US68 a tonne to less than $US55, well below the yearly average of nearly $US100 a tonne in the 2019 financial year.
Wilsons analysts noted New Hope made $345.1 million in pre-tax write-downs for the year to July 31, including the impairment of its Queensland mining assets, coal exploration, and a near-total write-down of the Bridgeport oil business.
“While new management look to effectively ‘kitchen sink’ this year’s results, the quantum of the write-downs is surprisingly large,” the analysts said.
This year’s setbacks for the coal sector come as thermal coal – the heaviest-emitting energy source – faces long-term pressure from economies switching to cleaner power generation to combat global warming, and a rising tide of investor pressure from climate-conscious funds seeking to reduce their exposure to fossil fuels on ethical and financial grounds.
New Hope noted coal markets “have been and are likely to remain volatile in the near term”, even as demand for high-quality thermal coal remained strong across Asia. However, the medium to long-term outlook remained “healthy”, the company said, as the need for industrial and domestic electricity generation remains strong based on future growth in Asia, New Hope’s main export market.
Shares in New Hope have shed more than 40 per cent in value so far this year. The stock ended the trading day 2.81 per cent lower at $1.21.
Source: Thanks smh.com