New Hope (ASX:NHC) share price seesaws after coal pricing update

An earnings upgrade has struggled to fire up the coal mining company’s shares.

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The New Hope Corporation Limited (ASX: NHC) share price has bounced between positive and negative territory today. This follows a market update regarding thermal coal pricing and demand.

The coal mining company’s shares closed the day down by 0.43% to $1.85.

What did New Hope announce?

New Hope upgraded its full-year earnings before interest, taxes, depreciation, and amortisation (EBITDA) guidance to between $330 million and $390 million.

Additionally, the company expects its strong cash-generating position to reduce its debt-to-earnings ratio to below 0.5 times by the end of FY21.

The coal miner’s uplift in forecasted financial performance was underpinned by a 60% increase in the Japanese reference price of thermal coal to US$109.97.

Thermal coal prices have jumped to 9-year highs on the back of strong demand from China, coupled with China’s ban on Australian coal imports.

With China’s ban in place, New Hope previously advised it had been “concentrating on establishing new markets and has successfully sold all high-ash product produced”.

The company expects restocking activities to take place for the northern hemisphere summer from June, which should provide support for pricing through to at least August.

New Hope share price surges to pre-COVID levels

New Hope shares have surged 60% since early May, and are now back to pre-COVID levels of around $1.80.

The upgraded EBITDA guidance should see New Hope top its FY20 results. However, it’s still quite a long way off beating its record FY19 performance.

In FY20, the company experienced a 44% slump in EBITDA to $290 million due to lower coal prices in the second half. This came despite a 6% increase in coal tonnes sold to 11.5 million.

FY19 was described by the company as the “best full-year profit before non-regular items in company history”. The company delivered an EBITDA of $517 million, a 11% increase on the prior corresponding period.

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