Commodities | 12:01 PM
New Hope Corp posted a strong FY26 result, in line with expectation, with a big dividend surprise due to rising thermal coal prices.
- New Hope Corp posted FY26 revenue and earnings in line with expectations
- Production and sales reached top end of guidance range
- Dividend well ahead of consensus
- Despite thermal coal prices remaining elevated, the share price has overshot
By Greg Peel
Thermal coal producer New Hope Corp ((NHC)) posted a largely in-line FY26 result.
Revenues declined by -1%, but beat consensus by 2%, while underlying earnings fell -33%, but were in line with the guidance provided by the company in its June quarter production report.
Lower earnings were a result of a weaker contribution from below-the-line items and abnormal inventory movements.
Operating cash flow and capex were also close to consensus forecasts.
One big positive surprise was the dividend. A fully franked final dividend of 30cps was declared, twice the consensus forecast, which takes total FY26 dividends to 40cps, an almost 18% increase on FY25.
Post payment of the dividend, New Hope retains a substantial cash position, with a pro-forma cash balance of around $525m, Ord Minnett notes. Management reaffirmed that a cash balance of about $300m is considered an appropriate minimum level for the business.
This means there is roughly $225m that could be viewed as excess capital, which may ultimately be returned to shareholders, and this is before considering further free cash flow generation.
Regarding production, New Acland (SE Qld) continued to ramp up through FY26, while Bengalla (NSW) delivered another consistent operating performance.
Despite significant weather-related disruptions earlier in the year, New Hope exceeded the top end of both production and sales guidance, with Bengalla also finishing at the low end of its cost guidance range.
The Coal Price
Thermal coal is used in electricity generation, while met coal is used in steel production.
Thermal coal index pricing is now 25% higher than Morgans’ previous assumptions and the broker expects pricing to strengthen slightly as we head into the northern hemisphere winter, before moderating in the second half FY27.
With the Middle East conflict re-escalating and fuel prices moving higher, FY27 average fuel costs are already tracking 10% above FY26 levels. As a result, Morgans has proactively increased FY27 cost assumptions to reflect the likelihood of higher fuel-related operating expenses.
Management provided a constructive outlook for thermal coal markets, Ord Minnett observes. Strong demand from Japan and South Korea, driven by energy security concerns and weather-related increases in power consumption, has supported prices.
Supply constraints in Indonesia and China have added further support to the Newcastle thermal coal price benchmark.
Guidance
Morgans notes New Acland continued to ramp up through FY26, while Bengalla delivered another consistent operating performance.
Despite significant weather-related disruptions earlier in the year, the miner exceeded the top end of both FY26 production and sales guidance, with Bengalla also finishing at the low end of its cost guidance range.
No FY27 production guidance was provided. New Hope typically provides guidance with its first quarter update.
Analysts do not anticipate any material changes at Bengalla. At New Acland, they have modestly reduced saleable production assumptions to reflect the expected impacts of the Cross River Rail project.
Cross River Rail is a commuter rail project under the Brisbane River.
Bell Potter suggests the key medium-term risk for New Hope remains logistics performance, which could weigh on New Acland's ramp-up to 5Mtpa saleable coal (from 3.3Mt in FY26).
Rail constraints associated with the Cross River Rail Project (scheduled for completion in 2029) and Queensland Rail industrial action continued to impact sales in the July 2026 quarter and the company is actively managing further potential disruptions.
Surplus cash and what to do with it?
While the company appears capable of distributing the surplus cash left over in FY26 relatively quickly, management is likely to remain measured, Ord Minnett believes, given upcoming capital requirements at the New Acland operation, particularly the Manning Vale West project, and ongoing uncertainty surrounding coal markets and the broader economic backdrop.
As a result, Ord Minnett expects any additional capital returns may be spread over the next 18–24 months.
On the other hand, Bell Potter points out that beyond the ramp-up of New Acland Stage 3, New Hope has a limited organic production growth pipeline, and expects earnings will peak in FY27.
Bell Potter expects New Hope may participate in further industry consolidation as an acquirer.
Presumably M&A would limit excess shareholder returns.
New Hope also released a resource & reserve update with total coal resources reaching 2.96bn tonnes, a 16% increase on 2025’s 2.55bn tonnes.
Macquarie notes this was driven by a 262Mt increase at the Bengalla mine and a 151Mt increase at New Acland as a result of updated geological modelling supported by recent exploration drilling.
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