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.
