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Chairman's Statement

In 2018 we have fortified our position in the competitive international coal market and returned the Yancoal Group to a position of strength and financial health.

 

ACHIEVEMENTS

2018 has been a year of extraordinary growth and success. We have achieved a record financial result, paid half year and full year dividends, significantly reduced our debt and successfully listed Yancoal Australia Ltd on the Main Board of the Stock Exchange of Hong Kong. 

Our transformational financial turnaround demonstrates the robustness of our operational, investment and cash flow management strategies.

EXCEPTIONAL RESULT

Our renewed financial strength has been achieved via our consistently disciplined approach to cost management and the implementation of production efficiencies.

Benefitting from a full year’s attributable production and coal sales from our tier-one assets, Yancoal achieved a record profit after tax of A$852 million from revenue of A$4,850 million.

Our total operating EBITDA was A$2,180 million, more than double that of the prior year with a full year’s contribution from Mount Thorley Warkworth and the Hunter Valley Operations complementing the Moolarben complex. The margin achieved was also stronger than the prior year.

In accordance with our assurance to return shareholder value following the strategic acquisition of Coal & Allied in September 2017, we have signalled a new era of financial stability for Yancoal via the payment of a maiden interim dividend totalling A$130 million on 21 September 2018, and a final dividend totalling A$211 million and special dividend of A$166 million on 30 April 2019.

Our total FY2018 dividend payments of A$507 million represent a payout ratio of ~60%, consisting of 40% of net profit after tax (A$341 million) and a 19.5% special dividend (A$166 million). Yancoal has subsequently announced a targeted dividend payout of 50% of net profit after tax in the year ahead.

CASHFLOW MANAGEMENT

The strength of the Company's 2018 balance sheet and cashflow management strategy has enabled Yancoal to pay down debt throughout 2018 and end the financial year with A$1,031 million in cash. This cash has subsequently been used to facilitate the Company’s final dividend payment and a further debt repayment of US$500 million.

We have now reduced the Company's total debt liabilities by US$1.4 billion since completion of the acquisition of Coal & Allied on 1 September 2017.

Such an achievement demonstrates the quality of our assets, the aptitude of our operational leadership teams, the commitment of our Board to our shareholders, and the sustained strength of the thermal and metallurgical coal markets.

Repayment of debt remains a critical objective of our long-term plan for strategic growth and we remain committed to further prepayments as revenue allows and in the best interests of all shareholders.

OPERATIONAL STRENGTH

Within the past two years, Yancoal has successfully restructured its business to significantly improve operational efficiencies and establish new blending and marketing opportunities.

We have implemented strict cost control measures at all sites and forged strong bonds with our many customers and joint venture partners to maximise the changing scale of our operations, post-acquisition.

With market demand for high-quality thermal coal remaining strong throughout 2018, Yancoal produced a record 50.0 million tonnes of saleable coal for 2018, up 59% on the year prior.

Our three tier-one assets led an increase in total attributable coal sales of 68% on the year prior, with Yancoal achieving total sales of 37.1 million tonnes in 2018, up from 22.1 million tonnes in 2017.

Importantly, we also delivered a consistently positive improvement in safety, awareness and training across all operations, decreasing our Total Recordable Injury Frequency Rate from 10.43 in 2017 to 7.74 in 2018.

We cannot achieve our production and growth targets without considering and adopting safe operating practices in everything we do. We maintain our position that we never compromise on safety.

HK LISTING

In 2018 we strengthened our shareholder base via Yancoal’s successful listing on the Main Board of The Stock Exchange of Hong Kong Ltd. 

As an established leader within the global resources sector, our Hong Kong listing is an important step forward in the Company's history. Yancoal Australia is now the only dual-listed Australian/Hong Kong coal operator and our listing will provide further opportunities to drive share price improvement and improve Yancoal’s liquidity.

Yancoal also raised A$268 million as part of the Global Offering associated with the Company’s HKEx listing, with the net proceeds raised to be used to repay debt and unsecured loans; finance potential acquisitions; and for working capital and general corporate purposes. Proceeds raised were also used to finance the acquisition of an additional 4 percent interest in Moolarben in December 2018.

OUTLOOK

In the year ahead, Yancoal remains focused on delivering high quality thermal and metallurgical coal to meet increasing global demand; and developing its pipeline of major projects.

We have high expectations for our future growth and remain committed to leading by example and operating in accordance with the values of the Yancoal Way, guided by our core beliefs of compliance, transparency and efficiency.

As we continue to support the development of a low-emissions future, coal remains a critical part of global baseload energy supply needs. It is therefore our responsibility to operate efficiently and transparently to ensure only the highest grades of quality coal are being produced and exported to meet future low-emission, high-energy needs in the international market.

Demand for both thermal and metallurgical coal is expected to continue to grow in 2019, and I believe this year’s financial and operational results clearly demonstrate we have the resilience, skills and strength to maximise future opportunities. Together, with the support of our majority shareholders, the Board and Executive, and operational leadership teams, I believe we will generate further success for Yancoal Australia and value for investors.

Baocai Zhang 

Chairman of the Board