Yancoal Australia Ltd

Yancoal reported first-half 2026 revenue of just over $3 billion, up 13% year over year; operating EBITDA of $767 million, up 29%; operating profit before tax of $328 million, up 42%; and statutory profit before tax of $56 million, with profit after tax of $17 million. ROM coal production was 32.5 million tonnes and attributable saleable coal production was 19.8 million tonnes, the company’s first-half record; cash operating costs were $96 per tonne, up 3%, and the overall realized selling price was $154 per tonne, up 3%, implying a $42 per tonne cash operating margin after royalties. Management said $272 million of nonoperating items reduced reported profit, including a $188 million hedge reversal loss and a $49 million impairment on Middlemount. For 2026, the company guided to attributable saleable product in the upper half of the 36.5 million to 40.5 million tonne range, cash operating costs of $90 to $98 per tonne with costs expected in the upper half of that range, and capex of $600 million to $750 million after a $150 million reduction due mainly to timing. It also said the Kestrel acquisition is expected to complete at the start of October or earlier, with about half of the $2.1 billion cash balance expected to be used and gearing to rise to about 15% to 18% on a pro rata basis.

Sharif Burra framed the half as another strong operational period and emphasized safety, noting the recent deterioration in TRIFR had already prompted targeted interventions and that July improved. He highlighted sustainability work, including the AASB S2 report, a climate transition plan, and Scope 3 methodology development. His tone was upbeat on operations and strategy: record first-half production, expected full-year production records, Kestrel as a high-quality long-life asset, and confidence that Yancoal can fund growth while still paying dividends.

Ning Su focused on explaining why reported profit was far below operating profit, citing $272 million of nonoperating items, mostly noncash except for a $20 million contingent royalty expense. He said the largest item was the $188 million hedge reversal loss from recycling the hedge reserve, followed by a $49 million impairment on Middlemount, and stressed these had very little impact on cash flow and cash balance. He also said Yancoal ended June with $2.1 billion of cash and no external debt, expects around half of that cash to fund Kestrel, and plans to take debt so gearing is about 15% to 18% pro rata. On capital allocation, he reiterated the dividend policy of the higher of 50% of NPAT or 50% of free cash flow and pointed to the $92.4 million fully franked interim dividend of $0.07 per share.

Analysts pressed on the $188 million hedge loss, and management explained it was the final recycling of old U.S.-dollar loan hedges, with the hedge reserve now at zero and no debt outstanding today. On diesel, management said the first-half raw material cost increase was mainly due to higher diesel prices, that they use external market forecasts for the rest of the year, and that last year diesel was about $7 per tonne of direct costs within reported $92 per tonne costs. Questions about dividends prompted management to restate that the policy is the higher of 50% of NPAT or 50% of free cash flow, with full-year payout assessed on a full-year basis rather than the half. On Kestrel, management said the mine looks well run, with good management and operating practices, and reiterated expected completion at the start of October or sooner; on HVO, management said the IPC decision is likely by mid-September and federal approval would follow on a separate, parallel track.