Yancoal (ASX:YAL) share price surges 15% as dividends merrily return

The coal miner has released its FY21 results. Here are the details.

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Key points

  • Yancoal released its full-year earnings after the closing bell on Monday   
  • It was a robust year for Yancoal with record revenue that saw the coal miner post strong earnings and reinstate the dividend 
  • In the last 12 months, the Yancoal share price has surged by 67%

The Yancoal Australia Ltd (ASX: YAL) share price is on the move today after the company released its financial results for the full year ended 31 December 2021 after the closing bell yesterday.

At the time of writing, Yancoal shares are surging 14.94% higher at $4.00 apiece.

Yancoal share price lunges forward on record earnings growth

The Yancoal share price is rocketing after the company announced its earnings results. Key takeouts include:

  • Record revenue from continuing operations of $5.40 billion, up 56% from $3.47 billion same time last year
  • Operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $2.53 billion, up from $748 million in FY20 – due mainly to the increased revenue
  • Operating profit before tax of $1.41 billion, up from a $218 million loss in FY20
  • Early debt repayment of US$500 million in October, plus a significant reduction in the gearing to 24%
  • Net profit after tax (NPAT) of $791 million, well above the $1.04 billion loss in FY20
  • Cash of $1.5 billion at the end of the year
  • Reinstated dividend due to strong cash earnings and lower gearing.

What happened this period for Yancoal?

Yancoal posted a solid set of financial and operating results for the year, underscored by a higher realised coal price and increased ratio of metallurgical coal sales.

As such, the company secured a record revenue of more than $5.4 billion for the period, staging an impressive performance for earnings across the board.

This led to a sizeable gain in EBITDA from almost $750 million to $2.5 billion. That's a staggering gain of approximately $1.75 billion in operating income for the year.

Additionally, Yancoal enjoyed a substantial reversal in the loss of $1 billion it sustained in FY20 to recognise NPAT of $791 million.

Not only that, but capital expenditure came in below guidance at $269 million "after some FY21 planned spending was held over into FY22".

However, as sales jumped, the cost of these revenues also jumped for the company in 2021. For instance, Yancoal's cash operating costs were $67 per production tonne versus $59 a tonne in 2020.

"Higher diesel prices, demurrage costs, and reduced output due to issues at Moolarben, wet weather, and COVID-19 were factors in the cost increase," the company said.

Nevertheless, the mammoth jump in earnings allowed the board to resume dividend payments. It allocated $930 million in surplus cash to a 50 cents per share final dividend and a 20.4 cents per share special dividend (both unfranked).

Management commentary

Speaking on the announcement pushing up the Yancoal share price today, CEO David Moult said:

The health and wellbeing of all our employees are of vital importance to Yancoal, and management and operational staff worked closely together during 2021 on the continued implementation of an effective COVID-19 pandemic response plan. The effort of all involved kept the production impacts of COVID-19 to a minimum, but there were some unavoidable production losses due to logistics constraints and staff absences because of mandated isolation requirements. We remain vigilant to the continued risks posed by the pandemic.

In relation to broader health and safety issues, Yancoal's 12-month Total Recordable Injury Frequency Rate remained below the comparable industry average throughout 2021.

What's next for Yancoal?

The company has set a number of guidance targets for 2022. Specifically, it is targeting saleable coal production of 35 to 38 million tonnes (attributable) and cash operating costs (excluding government royalties) of $71 to $76 per tonne. It is expecting capital expenditure of $600 to 650 million for the year.

"The bottom end of the production guidance and top end of the cost guidance is where existing challenges persist," the company noted.

"Capital expenditure increases in 2022, after two years of modest expenditure, as the Group replaces some mining fleet and to keep our large-scale, low-cost mines performing efficiently, together with the completion of the Moolarben coal wash plant upgrade."

Yancoal share price snapshot

In the last 12 months, the Yancoal share price has surged by 67%. It is also 54% higher this year to date.

During the past month, shares have spiked by 42%. As a result, Yancoal is clearly leading the broad index's return in 2022.

Motley Fool contributor Zach Bristow 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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