Yancoal Australia Ltd

ASX:YAL

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, thank you for attending Yancoal Australia's 4Q production report conference call. All lines are in listen-only mode at this time. The CEO, Mr. David Moult, will provide an overview of the 4Q report. We will then open the call for a Q&A session before concluding the call at 11:20 a.m. Sydney time. [Operator Instructions] I will now hand the call over to Mr. David Moult. Please go ahead, David.

[David Moult, executive]

Thanks, Lachlan, and good morning to everyone. I'll do a quick overview of Yancoal's quarterly and then we'll open up for questions. I do understand you've all got a busy morning this morning, so we'll move through as quickly as we can. So looking at the quarterly 50.5 million tonnes of coal produced for the year at the end of the fourth quarter with 38.9 million tonnes was salable. Of that 29.4 million is attributable to coal through Yancoal. Our coal production for the year, as we've talked about on several calls over the year has been affected by a lot of the external factors, including weather in the COVID pandemic, and we're around 20% down on 2021. [ 2022 ] prospects are more favorable. The La Niña cycle, we are expecting to dissipate and weather conditions to improve in 2023. And also, we're well into our recovery program following all that adverse weather, which impacted all our operations, especially here down in New South Wales. And has caused a shortage of inventory on overburden, which, of course, affects us longer term with the amount of coal that we can actually mine. We have introduced extra mining equipment into our operations and personnel. We've also enhanced our dewatering facilities for the future, built extra storage facility, but also install extra pumps and pipe ranges. So on the back of what's been quite a difficult year for the company. I think we've ended up with a good outcome, but we've also introduced the resources we need to get ourselves back to a normal position as quickly as possible.

On the back of that, though, we -- the year in other ways, has been quite exceptional. I mean our average realized price for the fourth quarter was AUD 422 per tonne and AUD 378 per tonne for the year. And that's driven a record cash generation across Yancoal. We've added another $1.5 billion to our cash position in the fourth quarter. We've repaid an additional $1.46 billion of debt in the fourth quarter -- that's total -- our total debt repayment at the end of the year being USD 2.7 billion U.S. -- sorry, U.S. dollars at the end of the year. $294 million in finance costs will be saved in 2023 on the back of that debt repayment.

As far as the market is concerned, 422 in the fourth quarter comprised of about AUD 430 average for thermal and $389 per tonne average for our met coal. The 12% drop resulted from several factors, including the product mix, timing of our contracts, and I think we've talked about that in previous calls and prior quarter capturing somewhat of a payments on our 12-month contracts.

Strong realized prices in the fourth quarter impacted Yancoal's performance positively as we said, and more than offset the reduced attributable sales volume. As far as the market is concerned, the global column new price remains near record levels. But the rain is dissipating. The La Nina is moving and passing, and both of those have impacted Australia's exports and we're expecting over this year that Australia generally will start to increase its capacity back to previous levels of sales across the whole of the Australian industry.

Lower energy coal from Indonesia is finding customers and appears to be competing with coal sold against the API 5 index on a value adjusted basis. And Russian thermal coal export proved surprising resilient during this fourth quarter, but winter conditions appear to be carving volumes later in the period.

On the market demand, the international energy agency predicted the global demand increased by 1.2% in 2022 and exceeded 8 billion tonnes in a calendar year for the first time. Europe presented a colder than normal winter, it was a bit of a slow start at the start, but now that cold spill has been present across the whole of that European area during December. And that's also assisted in bolstering coal demand. Chinese economic activity in coke consumption, we expect to improve after the new year. And -- if there is a resumption of Australian coal import into China, Yancoal will seek to balance, as we've said previously, our customer costs. We have and have been successful in placing 2 cargoes into China to an end user for delivery later in February.

I think over the last couple of years, Yancoal has demonstrated its ability to continually adapt to the changing markets and the international market conditions. And I think over that period of time, we have managed to diversify that market base quite significantly. That was not of the fact that we see China is a good strong market, and we look forward to China being a part of our mix in the future. But we also have to recognize we also picked up some other good markets through our diversification over the last couple of years.

I will pass 1 comment at the end of my piece, my overview, and that's on the New South Wales coal reservation scheme, which we flagged in the quarterly. And Yancoal has had premier meetings with the New South government, New South Wales government officials this week and was briefed on its intentions to introduce a thermal coal reservation policy that would include Yancoal. Prior to that, there was directions in place, but that only those directions are only impact to companies that were already supplies into the domestic market.

Yancoal is currently evaluating the potential implications of the scheme and intends to continue to engage with the new South Wales government to understand fully the implications. At this stage, there are a little more than I can say on the topic, but we'll keep the market informed. I think that's a very quick overview of our fourth quarter and the year as it comes to an end. And I'd like to hand back to -- to begin the question and answers.

[Operator]

Thank you, David. We will now commence the Q&A session now. [Operator Instructions]

our first question comes from Stephen Clarivate investor.

[David Moult, executive]

Nothing coming through.

[Operator]

Steven, in your line is unmuted, if you'd like to ask your question now is your chance. Okay. We'll move along to the next question. Our next question comes from Titus.

[David Moult, executive]

I think there must be a problem -- we're not getting anything at this end -- confirming that you still got audio connection with the conference room?

[Operator]

Yes, I do, Titus you are unmuted. If you would like to ask your question, please do now.

[Brendan Fitzpatrick, executive]

This is Brendan Fitzpatrick, Investor Relations manager speaking. If there are any people on the call that are having difficulties by all means, contact me via the e-mail address, it appears on the last page of the quarterly production report. I'll be more than happy to address any questions or topics outside the conference call if we are unable to connect through.

Welcome, let's try 1 more participant, so if we can get an active question line open, please.

[Operator]

[Operator Instructions]

[David Moult, executive]

I've received confirmation indirectly that our outgoing audio is still strong. So we've got confirmation from participants indirectly that the outgoing audio is live.

[Operator]

Okay. At this time, there are no further questions. I'd like to hand the call back over to David for closing remarks.

[David Moult, executive]

So I'll just repeat my comment first that Brendan Fitzpatrick, Investor Relations Manager. I am available on e-mail. -- it did appear that there were some questions that we couldn't get the audio connection through. Please contact me directly on the e-mail in the 4Q production report that mires appears on the last page. We will take the opportunity to make a few closing comments, and I'll address any specific questions outside this conference call to anyone that was online that wish to ask a question that couldn't get through sincere apologies. We'll look into what might have caused any of the issues. But rest assured, we are available to address any queries that you do have. We'll just do it outside this facility.

[Unknown Executive]

Thanks, it's Brendan. Look, I'll add my thanks for everybody attending this morning and my disappointment at the fact that we have had a problem, we'll try to get the bottom of why. Communication through Brendan is always open. We do have the team in the room here. Unfortunately, they can't address any questions that might have been directed, but they will be happy to address anything that he sent through. So please -- if you have a problem or an issue or a question, send it through to Brendan, he will make sure that the appropriate person or myself will get a number. So back to you fairly quickly. It has been a difficult year, and most of those factors that we've had the challenge of. But we're looking forward this year to improve weather, and we're looking forward this year to to getting ourselves back into the position that we were prior to the last 2 years of adverse rain and the COVID pandemic. So it's been strong, it's been a strong year, and we look forward to another strong year in 2023 and hopefully, a reduction in some of those external factors that have impacted us previously. So again, thank you very much for your attendance. And I look forward to speaking to some of you again at the next meeting. And after that, Brendan, I think we'll close the meeting.

[Brendan Fitzpatrick, executive]

Thanks, David. Thanks for all the management that were here in the room for participation. we will have every release for our financial results, and that will be accompanied by our second conference call at that time. So another opportunity for investors to engage directly with management. Thank you, [indiscernible]. We'll hand back to you for closing the conference.

[Operator]

Thank you. This concludes Yancoal Australia's 4Q production report. You may now disconnect.