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Results: Yancoal share price plunges 8% on profit slump

The Yancoal Australia Ltd (ASX: YAL) share price is down 8% this morning after the coal miner reported a 7% slump in its half-year net profit.

What did Yancoal announce yesterday?

In its after-market results announcement, Yancoal reported net profit after tax (NPAT) had slumped 7% on the prior corresponding period (pcp) to $345 million for the half-year ended 30 June 2019 (FY19).

However, it wasn’t all doom and gloom for investors, with Yancoal reporting an underlying NPAT of $564 million, up 56% on pcp.

This translated into a statutory basic earnings per share (EPS) of 26.1 for FY19, down 9% on pcp, while underlying basic EPS rocketed 49% higher to 42.7 for the half-year.

Net tangible assets (NTA) edged 4% higher on pcp to $4.52 per share while revenue remained flat at $2,350 throughout the period.

In terms of its joint ventures (JVs), Yancoal’s 85% held Moolarben JV and Hunter Valley Operations JV remain the biggest profit earners for the Aussie coal miner.

The two JVs contributed $179 million and $268 million, while Yancoal’s Warkworth JV also tipped in $147 million to the company’s half-year NPAT.

Yancoal’s operations remain concentrated in the Asia-Pacific region, with Japan, Singapore, China, South Korea and Taiwan accounting for 72% of the group’s half-year revenue figures.

As mentioned by Yancoal management, the company’s results are largely driven by supply and demand factors driving thermal and metallurgical coal volumes and prices, including macroeconomic trends and viability of energy alternatives.

Investors may be concerned by the softening in demand for thermal coal across the Asia-Pacific, but the stability seen in the metallurgical coal markets has kept Yancoal’s earnings from falling materially lower.

Foolish takeaway

A 7% drop in net profit is rarely met with a positive reaction but this morning’s 8% share price plummet has sent a clear message that shareholders aren’t convinced by the company’s prospects.

The Aussie coal miner has seen its share price fall more than 18% lower in a difficult year for the Resources sector, and this latest result could mean there is further room for the Yancoal share price to slide before the year is out.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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