New Hope Corporation (ASX: NHC) announced that it had achieved record clean coal production of 6.29 million tonnes in financial year 2012 leading to a 16% increase in net profit after tax (NPAT) or, alternatively, leading to a 67% decrease in NPAT! Both figures are quoted in the results presentation and they are both technically correct. How? It all comes down to "non-recurring items".
Last year New Hope had "other income" when it sold investments in Arrow Energy Limited and the New Lenton Joint Venture for a combined profit of $524 million. It's not going to do that again, so to give a fairer picture of year-on-year performance, it takes these one-off, non-recurring amounts out of the formal statutory accounts to do the comparisons.
Ignoring the non-recurring items, New Hope had revenue of $767.5 million, NPAT of $171.1 million, and earnings per share of $0.206, all of which were up 16% on the previous year. It declared a final dividend of $0.05 and a special dividend of $0.20, both of which are fully franked and payable to registered shareholders as of 22nd October.
New Hope Managing Director Robert Neale said: "New Hope's solid full-year result was driven by a record operational performance which saw both production and sales figures at all-time highs. Despite the unfavourable environment, this has enabled the Board to pay a special dividend, maintaining our track record of delivering superior shareholder returns relative to our peers".
The company expects to continue mining at a similar rate in 2013 while its 100%-owned Queensland Bulk Handling port facility has the capacity to expand from 8.67 to 10 million tonnes exported. New Hope has decided to review development projects following the deterioration in seaborne coal prices and the strength of the dollar. Mr Neale said: "Currently the coal sector is under margin pressure from high AUD:USD exchange rates and offsite cost increases including government taxes and charges".
Lower prices and higher costs threaten local coal miners such as New Hope, Whitehaven Coal (ASX: WHC), and Aquila Resources (ASX: AQA) and might even make mining giant BHP Billiton (ASX: BHP) consider its coal mining options in Australia.
Foolish takeaway
If you are still thinking about investing in this sector, New Hope has been a solid performer returning fully franked dividends of $1,224 million to shareholders over the last four years. The company has defensive investments in the port handling facility and its low-cost New Acland mine. With no debt and about $1.5 billion in cash on the balance sheet, the company is well placed to ride out the current downturn and even to make some opportunistic acquisitions.
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Motley Fool contributor Tony Reardon does not own any of the shares mentioned in this article. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
