Yancoal Faces Profit Squeeze as Coal Prices Fall and Supply Chains Disrupt

Financial Performance Highlights

Yancoal Australia Ltd’s half-year financial report for the period ending 30 June 2025 reveals a challenging market environment. The company’s net profit after tax plunged 61% to $163 million, a steep decline primarily attributed to a 15% fall in revenue to $2.62 billion. This revenue contraction was driven by significant decreases in global coal prices, with benchmark indices for thermal and metallurgical coal falling by over 20% compared to the prior year.

Despite these headwinds, Yancoal managed to increase its saleable coal production by 15% to 24.8 million tonnes on a 100% basis, reflecting operational improvements and a more balanced production profile across the year. However, sales volumes dipped 2% due to supply chain disruptions, notably rail network outages and port congestion at Newcastle, which created a backlog and elevated inventory levels.

Operational and Strategic Developments

The company’s tier-one assets; Moolarben, Mount Thorley Warkworth (MTW), and Hunter Valley Operations (HVO); delivered strong production gains, with HVO’s output surging 38%. Yancoal also announced a binding agreement to acquire an additional 3.75% interest in the Moolarben Joint Venture, increasing its stake to 98.75%, expected to close in the third quarter of 2025. This acquisition is anticipated to add approximately 0.2 million tonnes to full-year attributable production.

Yancoal continues to pursue organic growth, focusing on brownfield expansions and mine life extensions, particularly at HVO where a mine life extension application is under regulatory review. The company also agreed to divest its non-producing Donaldson Coal Complex, transferring rehabilitation liabilities to the buyer, The Bloomfield Group, with no cash consideration involved.

Cost Management and Cash Flow

Operating costs per saleable tonne improved, with cash operating costs declining to $93 per tonne, within the company’s guidance range. This was achieved despite inflationary pressures and increased production volumes. However, operating EBITDA fell 40% to $595 million, reflecting the revenue decline and inventory build-up.

Yancoal’s net operating cash flow decreased by 44% to $473 million, impacted by lower earnings and inventory accumulation. The company remains in a strong net cash position of $1.67 billion, supporting ongoing capital expenditure and dividend payments. Capital expenditure rose to $407 million in the half-year, targeting organic growth projects and sustaining operations.

Sustainability and Governance

Yancoal is advancing its sustainability agenda under the P4 Sustainability Strategy, aligning with new mandatory climate disclosure standards effective from 2025. The company reported a decrease in its Total Recordable Injury Frequency Rate (TRIFR) to 6.3, below the industry average, and continues to invest in employee development and safety programs.

Environmental compliance remains a priority, with ongoing audits confirming effective management systems. Yancoal is also exploring renewable energy projects, including a potential pumped hydro and solar facility at its Stratford mine site, subject to feasibility and approvals.

Market Outlook and Dividend

Looking ahead, Yancoal targets full-year attributable saleable production at the upper end of its 35-39 million tonne guidance and aims to maintain cash operating costs in the lower half of its forecast range. The company declared a fully franked interim dividend of A$82 million (6.2 cents per share), signaling confidence in its cash flow generation despite market volatility.

Yancoal’s strategic focus on operational efficiency, portfolio optimisation, and sustainability positions it to navigate the evolving coal market landscape, though ongoing geopolitical and regulatory risks remain key considerations.