Category: Stock Market

The Whitehaven Coal Ltd (ASX: WHC) share price is a rare bright spot on a tough day for ASX shares.

Shares in the Aussie coal miner have jumped 4.4% higher at the time of writing to $2.87 per share while the S&P/ASX 200 Index (ASX: XJO) has edged 0.2% lower.

Why the Whitehaven share price is lifting on Tuesday

Whitehaven is actually one of the biggest gainers in the ASX 200 this morning. That’s despite no news from the Aussie coal miner to start the day.

However, as always with resources shares, movements in underlying commodity prices could provide some insight. Coking coal prices have been tearing higher in recent weeks and continued to make strong gains overnight.

According to data from S&P Global Platts, cited in the Australian Financial Review, premium hard coking coal from Queensland sold for US$379 per tonne on Friday, setting a new record price.

That underlying strength in coal prices has helped boost the Whitehaven share price higher on Tuesday morning. The Aussie coal miner has been making strong gains today even as many ASX 200 shares experience a second straight day in the red.

According to Trading Economics data, coal prices are now trading at a new 10-year high having climbed 238.42% in the past year.

The Whitehaven share price has reflected those commodity price gains over that same period. Shares in the Aussie coal miner are up nearly 200% in the last 12 months. That means the company now boasts a $2.9 billion market capitalisation.

It represents a huge turnaround in fortunes from early September 2020. As the COVID-19 pandemic crimped demand for energy, Whitehaven shares were changing hands for as little as $0.85 per share.

Foolish takeaway

The Whitehaven share price is climbing higher on Tuesday even as many other ASX 200 shares are in the red. Strong coal prices are persisting and helping support the company’s current valuation in 2021.

The post Why the Whitehaven (ASX:WHC) share price is lifting on Tuesday appeared first on The Motley Fool Australia.

More reading

• New Hope (ASX:NHC) share price jumps on $337m profit turnaround
• These 3 ASX 200 shares are flying around the markets today
• Why the Whitehaven Coal (ASX:WHC) share price is tumbling 8% today
• Why Anteotech, API, Myer, & Whitehaven Coal shares are charging higher
• Here’s why the Whitehaven Coal (ASX:WHC) share price is rising today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Motley Fool Australia Chief Investment Officer Scott Phillips joined Weekend Sunrise on Sunday to discuss the recent unemployment numbers — which were wonderful on the surface, but hid a lot of the bad news. No, it’s not a conspiracy, just a result of the way the numbers are counted. And some other stats might be more useful…

The post A fall in unemployment during a pandemic? What do the numbers really mean? Scott Phillips on Weekend Sunrise appeared first on The Motley Fool Australia.

More reading

• Why the Whitehaven (ASX:WHC) share price is lifting on Tuesday
• ASX 200 (ASX:XJO) midday update: APA makes AusNet bid, New Hope results impress
• Why is everyone talking about ASX SPI Futures?
• Premier Investments (ASX:PMV) share price has room to grow: expert
• 2 strong ASX retail shares that could be buys

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At lunch on Monday, the S&P/ASX 200 Index (ASX: XJO) has fought back from a heavy decline at the open. The benchmark index is currently trading broadly flat at 7,243.6 points.

Here’s what is happening on the ASX 200 on Tuesday:

APA starts bidding war for AusNet

This morning APA Group (ASX: APA) announced that it has made a takeover approach for electricity distributor AusNet Services Ltd (ASX: AST). APA has made a non-binding indicative proposal of $2.60 per share in cash and scrip. This compares to the $2.50 per share offer made by Brookfield Asset Management on Monday. Management believes it would create a listed flagship Australian company with the scale and capability to accelerate the $20 billion growth in electricity transmission infrastructure needed to support the decarbonisation of Australia’s economy.

New Hope results

The New Hope Corporation Limited (ASX: NHC) share price is charging higher today after it reported a big turnaround in its full year profits. The coal miner revealed a net profit after tax (NAPT) of $79 million for FY 2021. This compares favourably to a loss of $157 million in the previous year. Strong coal prices and improved costs helped drive the profit rebound.

Domino’s shares downgraded

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is pushing higher on Tuesday despite being downgraded. According to a note out of Bell Potter, the broker has downgraded the pizza chain operator’s shares to a hold rating with a $155.00 price target. While Bell Potter is very positive on its outlook, its analysts believe its valuation is stretched. The broker notes that Domino’s shares trade at 40x estimated FY 2023 earnings.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Champion Iron Ltd (ASX: CIA) share price with a 4% gain. This appears to have been driven by hopes that the iron ore selloff has ended. The worst performer has been the APA share price with a 4% decline. Investors have responded poorly to its bid for AusNet.

The post ASX 200 (ASX:XJO) midday update: APA makes AusNet bid, New Hope results impress appeared first on The Motley Fool Australia.

More reading

• Why is everyone talking about ASX SPI Futures?
• New Hope (ASX:NHC) share price jumps on $337m profit turnaround
• AusNet (ASX:AST) share price to rise after APA (ASX:APA) starts bidding war
• Why this broker downgraded the Domino’s (ASX:DMP) share price
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended APA Group. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Australian markets awoke to turbulence this morning as the S&P 500 Index, a benchmark for the US stock exchange, closed well into the red on Monday.

Over 99% of the S&P 500’s members closed in negative territory, the highest number since June last year.

Geopolitical tensions between the US and China, a reset in investor confidence and fears of contagion — or flow-on effects — from the Evergrande debt crisis have woven into US equity markets.

This turbulence has got Australian investors talking about ASX SPI Futures today. Here we will discuss exactly what ASX SPI Futures are and why they are making the rounds in investor conversations.

What are ASX SPI Futures?

To answer this question, we first have to quickly cover what a Futures contract is.

Put plainly and simply, a futures contract is an agreement to buy or sell a particular asset (or commodity) at a predetermined price, at a set date in the future.

Doing it this way means you can “lock in” what price you will buy (or sell) your asset for and at what point in the “future” this will occur. Some even liken futures to a kind of insurance that covers major market events.

Companies and investors alike use futures contracts to protect their assets against price fluctuations or to speculate on these fluctuations for profit.

They’ve actually been around for hundreds of years and are an integral part of the global financial system.

Each futures contract has an expiry date and certain stipulations on the underlying asset, which could be commodities, share market indices, bonds and so on.

ASX SPI Futures contracts are the benchmark share market index futures contracts in Australia. They are based on Australian indices such as the S&P/ASX 200 Index (ASX: XJO).

For instance, the ASX SPI 200 Futures contract covers approximately 87% of the market capitalisation of listed securities in Australia.

It sounds fancy but you can buy and sell futures contracts on an exchange, just like you would with shares for instance. There are specific risks involved though, like leverage and margin.

How do they work?

Let’s set up a hypothetical scenario to understand how it works – it’s quite simple.

Let’s say we own shares in an exchange traded fund (ETF) that tracks the S&P/ASX 200 Index (ASX: XJO).

A good example is the BetaShares Australia 200 ETF (ASX: A200) which currently trades at $124 and change.

That means the ETF, which trades just like a share, fluctuates with movements of the broad index.

So if the S&P/ASX 200 Index takes a hit so too will the Australia 200 ETF, which isn’t ideal. Hence, we need something to protect, or “hedge”, against this impact.

Enter futures contracts. We can “lock in” what price we are able to buy and/or sell for beforehand to prepare for this event.

Ideally, we want something in place that gives us cover if the Australia 200 ETF takes a nosedive.

So we would buy futures contracts that guarantee the price we can sell our ETF into the future – say at $120 for instance. It’s a small cost for a big gain in cover — and here’s why.

If the broad index does take a hit and sends the Australia 200 ETF from $124 to $90, we are covered as our futures contract allows us to sell our shares at $120.

So whilst everyone else is feeling the pain of seeing their investment dwindle, the ASX SPI futures contracts protected ours. That’s the basic premise but there are obviously many more intricacies involved in derivatives markets, where futures trade.

So why again is everyone talking about ASX SPI Futures?

Traditionally, in times of financial market distress, or even expectations of distress, activity in the futures markets increases substantially.

So from explanations that futures are a “hedging” or protective-style instrument, it starts to make sense why ASX SPI Futures are a hot topic of conversation today.

Investors are looking to protect their ASX listed investments from any flow-on effects generated by global events.

To do so, they would have to head to the futures markets and purchase ASX futures that give them some assurance and cover over their equity investments.

As explained earlier, investors seeking to hedge against their shares depreciating in value would purchase ASX SPI Futures contracts that lock in a price they can sell for at some time in the future.

With this kind of uncertainty in global equity markets, it seems ASX SPI Futures are to stay in fashion.

The post Why is everyone talking about ASX SPI Futures? appeared first on The Motley Fool Australia.

More reading

• New Hope (ASX:NHC) share price jumps on $337m profit turnaround
• 5 things to watch on the ASX 200 on Tuesday
• Why are Coles (ASX:COL) shares defying the ASX 200 selloff today?
• Here are the top 10 ASX shares today
• ASX 200 shares in this sector are withstanding today’s selloff

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some ASX retail shares that could be strong contenders to consider at the current prices.

Businesses in the retail sector have the potential deliver attractive profit growth but may come with a lower price/earnings ratio.

Companies that are growing in size, particularly with their digital sales, could be ones to think about:

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is a leading retailer of products for babies, toddlers and families. Think of items like clothes, toys, prams and furniture.

In FY21, the ASX retail share delivered sales growth of 15.6% and pro forma net profit growth of 34.8% to $26 million.

It currently has a national store network of 60 Baby Bunting stores in Australia. The plan is to grow the network to around 100 stores around Australia in various formats.

Baby Bunting recently commissioned a new national distribution centre and store support centre in the second half of FY21, doubling its distribution capability and reducing the reliance on third party logistics. Supply chain capability is a key driver of continued gross profit margin growth.

Digital sales increased by 54.2% to $90.8 million, making up around 20% of the ASX retail share’s total sales. Private label and exclusive product sales grew 31.1% to be 41.4% of overall total sales in FY21 – it’s aiming for 50% in the longer-term.

It’s expecting to open three new stores in Australia in the first half of FY22, with another two in New Zealand.

Baby Bunting’s profit margins continue to increase. In FY21, its pro forma cost of doing business ratio improved by 14 basis points to 27.8%. The gross profit margin also went up 83 basis points to 37.1%.

It’s currently rated as a buy by Morgan Stanley, with a price target of $6.90. It’s valued at 23x FY23’s estimated earnings.

Wesfarmers Ltd (ASX: WES)

Wesfarmers owns a number of high-quality retailers including Officeworks, Kmart Group and Bunnings.

All three divisions had a strong year in FY21. Officeworks earnings before tax (EBT) rose 7.6% to $212 million, Kmart Group EBIT increased 69% to $693 million and Bunnings EBT went up 19.7% to almost $2.2 billion.

In FY21, looking at continuing operations, excluding significant items, revenue rose 10% and net profit after tax grew 16.2%.

Each of Wesfarmers’ divisions continue to invest for the customer experience, make the supply chain more efficient and improve the digital offering.

The ASX retail share is expecting to spend around $100 million over FY22 which is aimed to accelerate the development of a data and digital ecosystem, which aims to provide customers a more seamless and personalised digital experience across the retail businesses.

Trading is currently being impacted by lockdowns in Sydney and Melbourne, however the retail divisions are “well positioned” for the resumption of normal trading as lockdowns and restrictions ease.

Wesfarmers says that its current portfolio of businesses are cash-generative businesses with market-leading positions, making it well positioned to withstand a range of economic conditions and “deliver satisfactory shareholder returns over the long-term”.

The ASX retail share is also looking to continue to develop and enhance its portfolio by pursuing investments and transactions that will create value for shareholders over the long-term. For example, it’s currently trying to take over Australian Pharmaceutical Industries Ltd (ASX: API) for $1.55 per share. This will form the start of a new healthcare division which will focus on health, wellbeing and beauty.

At the current Wesfarmers share price, it is valued at 27x FY23’s estimated earnings.

The post 2 strong ASX retail shares that could be buys appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 shares holding up amidst today’s market crash
• How has the Wesfarmers (ASX:WES) share price been performing since reporting results?
• Why the Wesfarmers (ASX:WES) share price has been in focus this week
• Acquisitions for Wesfarmers and Domain, Telstra plans to grow and Myer back in profit. Scott Phillips on Nine’s Late News
• The Wesfarmers (ASX:WES) share price rose after the API (ASX:API) bid

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Baby Bunting. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Premier Investments Limited (ASX: PMV) share price has been a steady mover this year, up around 17% year-to-date to $27.98.

Shares in the retail conglomerate have held up relatively well, especially taking into consideration the recent lockdown extensions and broader market volatility.

The Premier Investments share price remains just 5% away from its recent all-time high of $29.35.

In a recent interview by Livewire, Nathan Hughes from Perpetual Limited (ASX: PPT) and Mike Murray from Australian Ethical Investment Limited (ASX: AEF) talked about their selection criteria for uncovering “the next small-cap champions”. In doing so, Hughes also highlighted some more mature opportunities in the retail space.

Characteristics for being a ‘small-cap champion’

Hughes said the first thing he looks for is a “long growth runway”.

“It’s not about having an enormous potential market or a lot of excitement around it, it’s about being in an industry that’s growing and looking for a sustainable runway for continued growth,” he said.

“And that may be through new products, the rollout of an existing store footprint, new verticals, or even sensible bolt-on M&As.”

He also talked about a company’s effective use of funds to bolster growth, saying:

“The other thing we look for is attractive returns on capital. Companies that can deploy capital well and generate really high rates of return can really accelerate their growth and become quite exciting investments.”

But the Premier Investments share price isn’t a small cap?

Premier Investments is far from being a small cap, boasting a market capitalisation of about $4.4 billion.

Despite sitting at the larger end of town, Hughes believes the company still has plenty of room to grow.

“It’s [Premier Investments] a company that’s done tremendously well, rolling out Smiggle and Peter Alexander, and more recently it’s had a lot of success online with huge scope for continued growth there,” he said.

“That’s both in taking those brands into additional markets and continuing to grow their online presence. Even though that’s grown nicely, we still think there’s a long runway ahead of that stock.”

At the time of writing, the Premier Investments share price is down 1.93% to $27.98.

The post Premier Investments (ASX:PMV) share price has room to grow: expert appeared first on The Motley Fool Australia.

More reading

• Premier Investments (ASX:PMV) share price moves as new retail CEO takes charge
• 2 impressive ASX shares that could be buys in September 2021
• Shaver Shop (ASX:SSG) share price in focus as profit jumps but outlook softens

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Australian Ethical Investment Ltd. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Clover Corporation Limited (ASX: CLV) share price has come under pressure on Tuesday following the release of its full year results.

At the time of writing, the specialist ingredients company’s shares are down 7.5% to $1.34.

Clover share price sinks on major profit slide

• Sales revenue fell 31.4% to $60.5 million
• Net profit after tax down 52% to $6 million
• Dividend of 0.5 cents per share declared
• No guidance given due to uncertainty

What happened in FY 2021?

For the 12 months ended 31 July, Clover was impacted by challenging trading conditions, leading to sharp declines in sales and profits.

The company notes that many of its traditional infant formula customers have found market conditions and the China market difficult to navigate. This is due to their access to market via the Daigou channel, which relies heavily on Chinese students and tourists, reducing dramatically through COVID-19 conditions.

One positive was that Clover has added new customers during the year, which has filled some of the gap. However, many of these customers are introducing new products that will take time to get established.

Furthermore, the company notes that it has a strong pipeline of new projects. However, once again, this won’t be a quick fix. It highlights that these projects have been delayed due to most customers having their workforce at home, making new product development slow.

What about FY 2022?

Due to the uncertain operating environment, no guidance has been given for the year ahead.

However, management is feeling cautiously optimistic about the future.

It commented: “The fundamentals of the business remain strong with opportunities for growth across markets and segments currently impacted by COVID-19. Clover will launch newly developed products and re-engage with customers to progress the new product and application pipeline in China, Europe, and the USA as restrictions ease.”

“To support future growth, Clover will also increase vertical integration into its supply chain, establishing partners in supply and logistics and add value through potential strategic acquisition and/or partnership. Clover expects to capitalise on the above opportunities once markets and borders re-open, however the timing is unknown. It is therefore difficult to provide meaningful guidance at this time,” it concluded.

The Clover share price is down 35% over the last 12 months.

The post Clover (ASX:CLV) share price sinks 7% on FY 2021 results appeared first on The Motley Fool Australia.

More reading

• RPMGlobal (ASX:RUL) share price drops amid ESG company acquisition
• The Emerald (ASX:EMR) share price is soaring 6% after a gold mine update
• New Hope (ASX:NHC) share price jumps on $337m profit turnaround
• Fortescue (ASX:FMG) share price bounces higher despite iron ore sliding below US$100 a tonne
• Why the Alligator Energy (ASX:AGE) share price is up 200% in a month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Clover Corporation Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The RPMGlobal Holdings Ltd (ASX: RUL) share price is sliding in late morning trade. This comes after the mining software company announced the acquisition of Perth-based Environmental Social and Governance (ESG) company, Blueprint Environmental Strategies.

At the time of writing, RPMGlobal shares are swapping hands for $1.81, down 2.95%.

RPMGlobal expands portfolio

In a statement to the ASX, RPMGlobal advised it has entered into a share purchase agreement to acquire 100% of the issued share capital in Blueprint.

RPMGlobal noted the acquisition is an important step to grow its mining-focused ESG team and capabilities. In particular, demand has heightened in recent times to address ESG related services and technology solutions from the mining industry.

The acquisition will complement RPMGlobal’s separate ESG mining division and the acquired Brisbane-based ESG company, Nitro Solutions, in July 2021.

Blueprint is expected to deliver ESG services to mining clients. This includes all phases from feasibility, funding and approvals through development and operations to asset closure and rehabilitation.

RPMGlobal noted that Blueprint has experience across environmental science and geoscience, risk management, impact assessment, due diligence, governance, social license to operate and geographic information systems.

The total consideration for the transaction is estimated to be around $3.5 million for the privately-owned company. This will be made up of a cash payment of $2 million on completion, $1 million in RPMGlobal shares and $500,00 in working capital adjustments.

The cash component will be entirely funded by RPMGlobal’s existing cash reserves.

In total, 530,178 RPMGlobal shares will be issued to the vendors at an issue price of $1.88 per share.

Completion of the deal is scheduled to close on 30 September, subject to a number of customary conditions.

RPMGlobal CEO and managing director Richard Mathews commented:

The existing RPM ESG team has already exceeded our expectations.

It has been fantastic to be able to introduce an ESG offering to RPM’s existing clients and to additionally expand the breadth of mining advisory offering available to all clients, especially at a corporate level, to better understand ESG and how to establish and address their growing ESG compliance and reporting requirements.

RPMGlobal share price summary

Over the past 12 months, RPMGlobal shares have posted a gain of more than 64%, with year-to-date up 44%.

Based on today’s price, RPMGlobal presides a market capitalisation of roughly $429.8 million and has approximately 230 million shares outstanding.

The post RPMGlobal (ASX:RUL) share price drops amid ESG company acquisition appeared first on The Motley Fool Australia.

More reading

• ASX 200 sinks, BHP and CBA fall
• RPMGlobal (ASX:RUL) share price slumps on mixed FY21 results

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended RPMGlobal Holdings. The Motley Fool Australia has recommended RPMGlobal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Emerald Resources NL (ASX: EMR) share price is soaring today on the back of an update on the company’s Okvau Gold Mine.

Emerald has announced the mine’s commissioning is complete and it has ramped up to full production.

At the time of writing, the Emerald share price is 86 cents, 5.52% higher than its previous close.

Let’s take a closer look at today’s news from the explorer and developer of gold projects.

Okvau ramps up to full production

The Emerald share price is taking off today on news of the company’s Cambodian gold project, the Okvau Gold Mine.

The company announced the Okvau Gold Mine has ramped up to full production and could see the company producing more than 100,000 ounces of gold each year.

The mine has also met and potentially exceeded its definitive feasibility study’s predicted output.

More than 19,000 ounces of gold has been produced by the mine so far, with gold production on track to reach 23,000 ounces by the end of the quarter.

Since the company’s maiden gold pour in June, it has sold 6,958 ounces of gold at an average price of US$1,795 an ounce.

Additionally, the mine’s process plant is running 10% above its nameplate throughput rate.

Commentary from management

Emerald’s managing director Morgan Hart said of the news driving the company’s share price:

We look forward to positive cash flows from the Okvau Gold Mine providing the opportunity to grow the company through exploration and acquisition. Notably with environmental approvals recently granted at the Memot Project, our exploration is scheduled to commence on a maiden drilling campaign in the near term.

Emerald share price snapshot

Today’s gains haven’t been enough to get the Emerald share price back into the green this year.

Right now, the company’s shares are trading for 4.4% less than they were at the start of 2021. However, they are swapping hands for 30.3% more than they were this time last year.

The post The Emerald (ASX:EMR) share price is soaring 6% after a gold mine update appeared first on The Motley Fool Australia.

More reading

• Clover (ASX:CLV) share price sinks 7% on FY 2021 results
• RPMGlobal (ASX:RUL) share price drops amid ESG company acquisition
• New Hope (ASX:NHC) share price jumps on $337m profit turnaround
• Fortescue (ASX:FMG) share price bounces higher despite iron ore sliding below US$100 a tonne
• Why the Alligator Energy (ASX:AGE) share price is up 200% in a month

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The New Hope Corporation Limited (ASX: NHC) share price is outperforming today after it posted a big turnaround in full year profits.

The miner is benefiting from the surging coal price and there’s little sign that the commodity is about suffer a painful correction.

The New Hope share price surged 5.3% to $2.17 in early trade when the S&P/ASX 200 Index (Index:^AXJO) tumbled 0.3%.

New Hope share price rallies on return to profit

Even its peers are struggling to keep up with the miner. The Whitehaven Coal Ltd (ASX: WHC) share price added 3.3% to $2.84 while the South32 Ltd (ASX: S32) share price fell 1.5% to $3.27 at the time of writing.

New Hope posted a net profit before tax of $111 million and a net profit after tax (NAPT) of $79 million for FY21. This stands in contrast to the $226 million pre-tax loss and NPAT loss of $157 million from the previous year.

Profit drivers

A supply shortage of the fossil fuel is the primary reason for the strong result, but improved costs also helped pad the result.

“The Newcastle 6000 Index hit 10-year highs by financial year end rapidly recovering from the depressed market conditions experienced at the start of the financial year,” said New Hope’s chief executive, Reinhold Schmidt.

“The Company also benefited from reduced underlying Free on Board cash costs of $63.70 as a result of cost  savings  implemented  at  both  Bengalla  and  New  Acland,  and  the  rationalisation  of  the  Brisbane corporate office.”

New Hope share price brushes off weaker output

However, total production fell to 9.6 million tonnes in FY21. New Hope produced 11.3 million tonnes in the previous 12-months.

The weaker output is due to the midlife shutdown of the dragline at Bengalla for scheduled maintenance.

But that isn’t enough to make a dent on the New Hope share price. Operations at Bengalla is back to full production and the coal price looks almost unstoppable.

That’s in sharp contrast to iron ore, which has collapsed by more than half since hitting its peak, and taking down the Fortescue Metals Group Limited (ASX: FMG) share price and Rio Tinto Limited (ASX: RIO) share price in the process.

Outlook brings new hope to investors

But the outlook for the New Hope share price seems brighter even as the world is decarbonising.

Management pointed out that supply will struggle to keep up with demand for many years. This is even as demand is tipped to decrease rapidly.

Perhaps the difficulty in securing funding for new coal projects is contributing to the bullish imbalance.

Further gains for the New Hope share price?

“The Company achieved an average realised price of $101.36/t in 2021,” said Schmidt.

“At 31 July 2021, the Newcastle 6000 Index had almost doubled from January 2021 levels, to USD$150 per tonne, and has continued to trend upwards.”

New Hope declared a 7-cent a share final dividend. This takes FY21 total dividend to 11 cents.

The post New Hope (ASX:NHC) share price jumps on $337m profit turnaround appeared first on The Motley Fool Australia.

More reading

• Fortescue (ASX:FMG) share price bounces higher despite iron ore sliding below US$100 a tonne
• Is the South32 (ASX:S32) share price a buy for dividends?
• 5 things to watch on the ASX 200 on Tuesday
• Why are Coles (ASX:COL) shares defying the ASX 200 selloff today?
• Here are the top 10 ASX shares today

Motley Fool contributor Brendon Lau owns shares of Fortescue Metals Group Limited, Rio Tinto Ltd., and South32 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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