Full Year 2026 Whitehaven Coal Ltd Earnings Call
Speaker #1: 5 and 2, dial in to our full year 26 financial results presentation. As usual, I'll go through a presentation quickly. I'm joined by my colleagues here, our CFO Kevin Ball, our COO Ian Humphris.
Speaker #1: We'll go through the presentation, between Kevin and myself, and we'll move on to Q&A very shortly. So thanks very much again, just flick over the page.
Speaker #1: We've got our disclosure, our disclaimer there, because we do have forward-looking statements in this document, so I'll bring that to your attention. For your reading pleasure.
Speaker #1: I'll just move over to our highlights. But first and foremost, safety and environment performance is front of mind for us at all times. In the expanded business, our safety record has actually been very positive, so our tripper at 3.3 is a record for the expanded footprint.
Speaker #1: Now, which is very positive to see. And we'll continue to continue to push that as the years progress. Environmental performance: we've had no events in this particular year—although I do note that one event, which was recorded in last year, FY25, has migrated into the form of a penalty notice, which we will retrospectively report in our FY25 year, but that did occur in this.
Speaker #1: But there were no other events in the course of the year. Our team remains dedicated to ensure that that is the case, and overall our environmental performance and compliance has been very good.
Speaker #1: Just moving over to the highlights. I know some of these numbers are already familiar to you with the quarterly reporting that you've seen along the way.
Speaker #1: We ran out a very good year operationally at 40.3 million tons, quite a milestone to cross the 40 million ton line. And so that was broadly at the top of our guidance.
Speaker #1: And the split between Queensland and New South Wales at 20.1, Queensland 20.2, marginally crept over the top for New South Wales. Equity sales at 26 million tons, slightly down on last year, although last year we should call the joint venture was formed during that year, so it's not a like-for-like comparison in that sense.
Speaker #1: Revenue at 5.4 billion, 57% metallurgical coal, 43% thermal. Achieved a price of, in Aussie dollar terms, $202 per ton, reflecting some softer coal market dynamics.
Speaker #1: And of course, a currency which has moved adversely over that period, which I'm sure we'll talk to a little bit later on. The cost outcome for the year has been excellent, and $132, I'm sure, has taken a few of you by surprise when we reported that unordered as it was during the quarter.
Speaker #1: Report, but that's a terrific result down from $139 in FY25. Certainly at the lower end of guidance. EBITDA are at 1.25 billion. Underlying, as it is, $677 million for Queensland, $596 million for New South Wales.
Speaker #1: The underlying NPAT of $227 million and our statutory NPAT at $385 million reflects some post-tax non-recurring gains of $158 million which Kevin will cover shortly for you.
Speaker #1: The board has seen fit to declare a fully frank dividend of 6 cents per share. Payable on the 15th of September. And to allocate an equal amount up to a further 47 million dollars in our buyback program, which will be executed over the next 6 months.
Speaker #1: So just flipping over, just the year itself in terms of pricing, FY26, you know, was a period of softer pricing overall, but we did see improvement in the second half, which was positive.
Speaker #1: As I've mentioned there before, the full year average at $202 per ton in Aussie dollar terms was down 6%, to say the price has recovered in the second half, but the currency, as you can see on the chart here, has moved significantly over the years that we depicted here.
Speaker #1: So in Aussie dollar terms, that's actually been a negative for realized coal pricing in Aussie dollars. Metallurgical pricing has actually been a little bit better in more recent times.
Speaker #1: Thermal price also the same, been rangebound for a good period, but obviously energy security concerns related to the Middle East conflict certainly had in the second half improve the price and be quite robust since that time as that conflict unfortunately continues to go on.
Speaker #1: Demand for our products has been very strong, so no issues there with our customers. They continue to take all the contractual commitments and, in fact, asking for more.
Speaker #1: So we are a little constrained in that sense, but that's a positive underpinning for the market. And our outlook on the medium to long term remains unchanged and positive.
Speaker #1: Flicking over quickly just to the spread of our sales. 90% of the sales, as you can see for the year, were in Asia. Japan obviously remains the heart of the business, with over half of our sales India at 11%.
Speaker #1: And then the remaining third is broadly across Malaysia, Korea, Europe, and Southeast Asian countries, plus China and Taiwan. So a nice spread of the sales mix across the non-Japanese sales, and we see that continuing to expand in this new year.
Speaker #1: 57%, I can say, of the sales revenue was met coal in this year. Flicking over to the commodity insights data. We've re-presented this for you.
Speaker #1: The timeline for this has been extended a further 10 years, just to highlight to you for that. So it looks slightly different from what you've seen in the past, but both sides of this equation highlight growing demand and a shortfall of production.
Speaker #1: And I'm sure that's no surprise that everybody sees that in terms of $162 million ton shortfall projected out to 2050 on the metallurgical coal side.
Speaker #1: And $118 million tons on the thermal side over the same time horizon. No surprise here, approval timelines blowing out, and supplier response hasn't been hasn't been meaningful at all, despite the fact we've been through periods of decent pricing and underlying demand just continues to truck along, which is very positive for us.
Speaker #1: And positive for anybody who's obviously got productive assets, on foot already. In terms of the operational results, I'll just skirt over this relatively quickly because you've seen this in the quarters.
Speaker #1: Again, Queensland, the split there and New South Wales. So the total 40.3, again, quite a milestone for us to cross that threshold. And our sales at a managed level, 32.7 for the year compared to 30.2 in FY25.
Speaker #1: Production, Queensland 20.1, did a reasonable job. We obviously had a weather-affected weather-affected quarter heavily weather-affected, and that manifested itself particularly at Blackwater in the year, but the recovery from that actually was quite good.
Speaker #1: And to round out at 13.9 million for the year, it was a positive result for Blackwater. Donia had an outstanding year results-wise, so 6.2 million tons of rum was certainly a highlight, and you can see the trajectory in our ownership here has been very positive the momentum we've been able to gain over the period of our ownership of the Queensland business has been really good.
Speaker #1: Our focus for this new year really is just to make sure we continue to rebuild the inventories for the drag line operations at Blackwater, betting down a life of mine plan that was satisfied with for that asset.
Speaker #1: And then, of course, Donia, as we've spoken about, we want to make sure that the AHS productivity gains, which we think are possible, we want to see more progress on that over this next 12 months in particular.
Speaker #1: And particularly as it's important to us because we are moving into the southern domain of Donia, and so those holes become a little longer, so we want to make sure that the productivity benefits are there for potential benefits are there for the AHS system there.
Speaker #1: New South Wales at 20.2, as I said, just crept over the Queensland 20.1. So won the state of origin this year. Very good to see the continuation of improvement there at Morse Creek, and in particular.
Speaker #1: So all the open cuts did well, but Morse Creek's nice to see that building momentum, and that momentum is carried into this new year, which is positive.
Speaker #1: No rise we've talked about through the quarters has had a couple of difficult difficult times. We are seeing very positive production performance as a result of some of the work we've done to improve the health of the long wall.
Speaker #1: And so that's positive to see, but the year itself in total, yes, it was from our perspective, it was less than we would have expected.
Speaker #1: Given that bumpy ride and that the geotechnical conditions that we found in the last quarter in particular that gave us a little bit of heartburn.
Speaker #1: Moving over, I'll just, sorry, I'll just comment there. For our new year, we haven't sort of focused on this before, but we have just received an approval to go to 4.1 million tons for our GSC operations.
Speaker #1: Which will be vetted into this new financial year. So even though the open cuts between Bickery and Tarawanga have done a very good job, and but this year we'll be able to take that a little bit further, with the 4.1 approval just recently received.
Speaker #1: With that, I'll hand over to Kevin.
Speaker #2: Thank you, Paul. So this slide, I think, Paul referred to the good cost management. What you'll see in here is the impact of softer coal prices.
Speaker #2: So in '26, our average US dollar price was $137. Against $140 in the previous year. The other impact there is the FX went from 65 in FY25 to 68.
Speaker #2: And collectively, that's almost $300 million worth of revenue that didn't turn up in '26, but turned up in '25. Sales volume, a little lumber at 24.
Speaker #2: But the real issue, or the real paper on the ear, is the $182 million in costs out and the program work to deliver $132 as a unit cost for the business.
Speaker #2: And that really is the piece that helped to deliver $1.25 billion in EBITDA for the period. So we're pretty it was a lot of hard work by a lot of people focused on a range of initiatives in the business to deliver that outcome, so we're pretty proud of that outcome.
Speaker #2: Turn the page, underlying EBITDA, as I said, $1.25 billion. Converted to an underlying NPAT of $227 million after depreciation amortization net finance expenses and tax.
Speaker #2: And I apologize for this, but it's a little complex in here when you get to the non-recurring items on the next line, $158. But you'll also see in the back of this pack some information around where we think interest is going to be and where depreciation is going to be in years to come.
Speaker #2: Depreciation was 534, amortization $148. That's about $680 million. Our capex for the year was about half that, or about $349, $350. Our underlying net finance expense of $254 really reflected the acquisition funding in place in April '26, because the refinance of that only ever really kicked in in about April.
Speaker #2: So we'll get about a quarter of that. You should see a little bit better this year because of that refinance. And the non-recurring post-tax gains of $158.
Speaker #2: These are the non-cash remeasurement of contingent consideration. So you know we have to pay BHP, or we've had to pay BHP a share of coal price appreciation, or coal price outperformance.
Speaker #2: We remeasure those, and we remeasure the value of the deferred. So that's largely what falls into the non-recurring items. So statutory NPAT $385 million, and you will see that note 2.2 in the financial report for those of you who want to read the report.
Speaker #2: There's a reconciliation between underlying and statutory NPAT. If I turn the page, this was a really interesting slide for me. A $48 margin. It's down a touch from the previous year, and when I say a touch, it's down about $2, I think, 48 plays 51.
Speaker #2: Really a softer price. Average revenue after royalties was $180 a ton. Compared with $190 in FY25. Average cost of sales, though, was down $7 a ton.
Speaker #2: And I think there's about $2 in diesel in that. So it would have been about $130 had diesel continued to perform in the way it did in the first seven or eight months.
Speaker #2: So together with that's why you'd say, or we would say, lots of work went into delivering 132 for the year. So we're pleased with that.
Speaker #2: EBITDA margin, as I said, $48. Or 27%. So it's a good outcome. Turn the page. Cost of coal improved $7. So unit cost improved seven bucks from $139 to $132.
Speaker #2: We were $135 at the turn, at the half year, so that's good. There is some benefit here from a sales mix between New South Wales and New South Wales volumes.
Speaker #2: There's about $4 in that. There's also savings of about 9 to 10 dollars delivered through a range of initiatives and cost restraints. You know, the 25 cost outcomes, or cost savings that we'd put in place in FY25 continued to roll through into FY26.
Speaker #2: And we delivered around 65 million dollars of annualized saving in FY26 through more than 100 individual projects, across the business, from corporate logistics and marketing, and operations.
Speaker #2: So as I say, it was an effort of everybody across the business. Significant savings and volume benefits were partially offset by inflationary impacts and higher diesels.
Speaker #2: You know, between diesel inflation, we think that's about 6 to 7 dollars that would have pushed up from the previous year. So again, a good outcome.
Speaker #2: Turn the page to the segment results for FY26. Queensland 2.9 billion dollars in revenue. Underlying EBITDA of $677 million. New South Wales 2.4 billion dollars in revenue, and underlying EBITDA of $596.
Speaker #2: The Queensland EBITDA was about 22% down on the previous year, which reflected the 30% sell down to Blackwater, that took place in April 2025.
Speaker #2: Or in March 2025. And New South Wales EBITDA was up 11%. Good cost performance, and an improved coal price contributed to those two things.
Speaker #2: And the net finance expense reflects the underlying component of the total finance expenses. We're really pleased to have 900 million dollars fixed at 6.5.
Speaker #2: And the variable component, the 475 million dollars of drawn bank debt has pretty much matched or exceeded by the cost on the cash that's on deposit.
Speaker #2: So our interest cost should be pretty easy to pick on our borrowings in future years. So the number of 254 should come down to around 215 in FY27.
Speaker #2: There's a full year benefit of that lower cost come through. If I turn the page, net debt at 1.3. If I've got 1.25 billion in EBITDA and 1.3 in net debt, then I'm about one turn of leverage at what would arguably be the bottom of the cycle.
Speaker #2: So it fits within the guidance that we've said to market on how we look at our debt. And to be honest, look at that and say that's a pretty good outcome, given we've paid $738 million Aussie, or $500 million US to BHP.
Speaker #2: At the start of that. So I'm pleased with that. If we start 1.4, 1.3 during the year, net cash inflow from operating activities, 857 million dollars.
Speaker #2: We spent 349 million dollars on capex, as I said, about half the depreciation amortization charge. 119 million on leases. We gave shareholders 156 million.
Speaker #2: And there were some other investing activities, which is us putting money into the rare earths end of town in Brazilian rare earths, rare earths of America.
Speaker #2: And that pretty much explains how you get from an adjusted 1.372 at the beginning of the year to 1.327 at the end of the year.
Speaker #2: Come across into the capital structure. The refinance completed in the second half. We now have a 1.5 billion dollar capital structure comprising 600 million of bank funding, of which 475 is drawn and 125 is undrawn.
Speaker #2: And 900 million of senior secured notes that are fixed coupon rates. The refinancing lowered the cost of debt, diversified the funding sources, and extended the tenure.
Speaker #2: And you can see that in the graph that's on this page, where you can see maturities in FY31, 32, and 34. That refinancing will save about 50 to 55 million a year.
Speaker #2: And we're really proud now that we have an investment grade rated senior secured debt instrument, and we're focused on maintaining those strong credit metrics.
Speaker #2: The other thing I'd say to you about that is that if you look at those bonds since issuance, they've traded tighter since we sold them.
Speaker #2: And they're now back inside 6%. So that's been really well received by the market, and really well received by investors. They've done well out of it as of week.
Speaker #2: Turn the page. We're always maintain strong liquidity. And this slide should tell you no different. 778 million dollars of cash on hand. Our gearing was about 18%, which is within our 10 to 20% rate.
Speaker #2: And as I said before, we're about one times levered on our EBITDA. Well placed through the bottom of the cycle. No real pressure on the business in terms of tenure, or in terms of refinance, or in terms of liquidity.
Speaker #2: So we're looking forward to April 2027, when the three-year deferred and contingent payment arrangements for Dornier and Blackwater stop. And then the cash flows from the Queensland assets entirely flowing to Whitehaven Coal shareholders, which will be a good day.
Speaker #2: Yeah. So further strengthen the balance sheet. Let me hand back to Paul.
Speaker #1: Yeah, thanks, Kevin. Yeah, look, I think that's a very good summary. It's some excellent work that's been done during the course of the year to position the company well from a financial structure perspective.
Speaker #1: And as you say, great to see the company with investment grade debt instruments certainly a rarity in our sector. The capital allocation framework, as you know, is very important to us in repo trade here on this slide, as it was in the past.
Speaker #1: So no change there. And as Kevin summarized for you, our current situation fits firmly within the metrics described here in the center of the page.
Speaker #1: So that's a very good positioning for the company. And it gives everyone a clear understanding as to how we think about the deployment of the incremental dollar of capital.
Speaker #1: And balancing, obviously, ensuring that we provide shareholder returns through the balancing of the various alternatives to use that dollar, be that for divvies and buybacks, obviously, our organic growth options that we have.
Speaker #1: And of course, M&A episodically when something compelling is on the table. So moving across as far as this year goes, 159 dollars of capital returned in respect to the FY2026 year.
Speaker #1: And split evenly between frank dividends and our buyback. So the year's result does round out our payout ratio at 70%, which is slightly out of bounds, from our 40 to 60% range.
Speaker #1: But that really is a function of the fact that we paid a divvy in the first half with meager strong balance sheet, but meager underlying impact.
Speaker #1: And so the addition of about 6% fully frank dividend is our final, brings us to around 70% of an FY6 underlying payout ratio. So 64 million dollars has already been returned.
Speaker #1: And so a further 95 million dollars is to be returned via that dividend. And then we will complement that, as I mentioned a little earlier, with the buyback of similar proportion over the next six months.
Speaker #1: So that's about 47 million dollars. The split between frank dividends and buybacks. Certainly reflects the composition of our register. And also we do often take feedback from our shareholders in terms of what their preference is from a dividend and buyback perspective.
Speaker #1: And we get pretty much equally weighted feedback on our say. And that's not because of that's not a domestic to external split. That's actually domestic shareholders giving that feedback as well.
Speaker #1: So that the buyback is meaningful to them. But over the course of the year, I think we've delivered a very, very solid performance for the business.
Speaker #1: If you look at it just on a year-on-year basis, itself, our total shareholder returns for the year to 30 June 26 is 41%. Ranking Whitehaven at 16 of the ASX 100, which is not a bad performance given that we hover around.
Speaker #1: Scale-wise, around the 80 to 90 in the ASX 100. So not a bad effort from all the team here. I think you would agree.
Speaker #1: I'll flick over to Guidance now, if I can. So looking at the guidance ahead for us. Now, as we are now into our third year of ownership of the Queensland assets.
Speaker #1: And so is that bigger portfolio. We feel like we've bettered that down to a good degree, although we've got plenty of work to do to optimize the portfolio even further.
Speaker #1: The confidence that we have in the Queensland business now, two years in, entering this third, allows us to narrow the managed ROM guidance slightly.
Speaker #1: So similar to last year, last year was 37 to 41. We've tightened that up a little bit to 38 to 41 as our guidance for managed ROM production for this new year.
Speaker #1: We feel that the downside we understand better, and so that's why we've tightened that up a little bit better. Relatedly, managed coal sales reflects that change as well.
Speaker #1: So our guidance there at 30.4 to 33 million tons for the year. And cascades through to the equity coal sales as well. At 23.9 to 26 on the upside.
Speaker #1: Unit cost, this is obviously the one which is quite challenging. And whilst we have done very well in this year to bring ourselves into 132 for the full-year FY26, the 27-year we enter the year not as we entered last year.
Speaker #1: We entered this year with an ongoing conflict in the Middle East, which makes it a little bit difficult for us to estimate where to locate our assumptions around diesel pricing, say, for instance, which is material to us and our cost base.
Speaker #1: And so we've left the spread for our cost guidance across a $15 range in Aussie dollar terms. So 132 at the low end to 147 at the high.
Speaker #1: I'm sure everybody accepts that trying to predict that at this point in time is a difficult exercise. So we've chosen to leave that at that $15 range.
Speaker #1: But as you can see, and as Kevin's described well, our efforts during the course of the year to bring our cost down despite the turbulence that affected us, not just the Middle Eastern conflict effect on diesel pricing, but also the weather impacts that we had, obviously, in Q3 and the recovery of that.
Speaker #1: And the excellent work that the team's done in reducing our costs across the business. Gives us confidence that we can certainly trend down towards the bottom end.
Speaker #1: But I just provide that caveat that the diesel pricing assumption is something that we've taken our best attempt at performing. But I'm sure one way or the other, it'll be a variance to what it is that we've forecast for the year.
Speaker #1: Now, CAPEX, we ended up as we said, 349. So below our CAPEX and our range this year is slightly higher. So we're 390 to 490 for our CAPEX guidance for this new year.
Speaker #1: As has been in the past, and as Kevin's highlighted again, we've spent less than depreciation amortization in aggregate. We're not attempting here to do to compromise any of the prospects for the business.
Speaker #1: But we are making sure that we measure out the capital in judicious fashion and make sure that the dollars are going to the right projects to make sure that the business is sustained and well maintained.
Speaker #1: And that we are balancing the needs of the competing requests for capital across the business. So again, we've taken a conservative position in terms of our guidance for this new year.
Speaker #1: We think we are carrying good momentum into the year. As you can see, volumetrically and cost-wise. But we feel it continues to be prudent to make sure that that conservative approach is embedded in our guidance for this new year.
Speaker #1: So that rounds out pretty much where we're going for this year. Now, in terms of the focus for this new year for us, continued safety and environmental performance is front of mind at all times.
Speaker #1: So I mentioned the cost discipline. We feel like there's potential here and as we've commented in the past, we have upside in terms of cost reductions associated with our recent renegotiation of our rail contracts, which is very positive.
Speaker #1: And in the case of Queensland, the elimination of surplus take all pay similarly to what we did with our New South Wales recontacting of that same service.
Speaker #1: But we want to make sure that the business continues to deliver reliably and sustainably over the out years. So our focus is making sure that we've got a robust platform that delivers consistently across the year.
Speaker #1: And of course, our guidance is paramount to us. So we want to make sure that we deliver that in good form in this new financial year.
Speaker #1: So thanks for taking the time. We're very pleased with the year that we've rounded out. And look forward to the questions from our Q&A session.
Speaker #1: Thank you.
Speaker #2: And thank you, Southside analysts. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced.
Speaker #2: If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question.
Speaker #2: Your first question comes from Rahul Anand with Morgan Stanley.
Speaker #3: Oh, hi. Good morning, Paul, Kevin, Ian. Thanks for the call. Can I perhaps start with CAPEX? So in terms of the CAPEX guidance this year, we do have a bit of a bump up.
Speaker #3: And I know that it's coming mainly from Nara Bryan. I think there was a bit of deferral from last year into this year. But I guess my question's more focused on how we should think about the maintenance CAPEX on a go-forward basis.
Speaker #3: Do you think there's any one-offs here that we should exclude besides the Nara Bryan impact? Anything to call out at all to note for the Thanks.
Speaker #1: Yeah. Thanks, Raul. Look, we have been cautious with the CAPEX, as you know. And obviously, with the expanded footprint, we've been that's been part of the cultural sort of journey, if you like, in terms of making sure that we've got discipline around the requests for capital and how it's deployed across the newer part of our business.
Speaker #1: As you rightly point out, Nara Bryan has been in need of deployment of capital here. And we are part way through a two-stage process of refurbishing our long wall.
Speaker #1: So we did that at the last change out. First part of two. And of course, with the next change out, there is a decent amount of capital that goes into completing that refurbishment of the wall itself.
Speaker #1: There is capital also involved, obviously, in opening up, if I can put broadly, the stage three areas from an infrastructure perspective. And so that requires capital as well.
Speaker #1: And but we have put this off. And it is that work needs to be conducted during the course of this next year, which will put us in a very solid position, we feel, going into panel 205.
Speaker #1: Because we'll get through the bounces panel, conduct that second stage of that work, and get into a new panel, which we know has got less geotechnical concerns.
Speaker #1: And a wall, which will be fighting fit in terms of being able to lift our productivity and production levels at Nara Bryan. But no other one-offs that you should be concerned about.
Speaker #3: Got it. So basically, expect the CAPEX to be a bit lower going forward after adjusting to that is the right way to think about it.
Speaker #1: Well, I think yep. No, I was just saying, well, we're not forecasting lower CAPEX going forward. We're not giving guidance over multi-years. All we're highlighting is that the one that at Nara Bryan, obviously, is episodic.
Speaker #1: It's obviously not a reoccurring expenditure that we need to make for a refurbishment of a wall. But into the out years, I'm sure as fleet replacements and things take hold, we will guide you in future years as to when those things come.
Speaker #3: Understood. Okay. And then for the second one, you touched on it a bit in your introductory comments as well. Paul, and that's related to the diesel price.
Speaker #3: So obviously, the assumption this year is in large part looks flat versus FY26 in terms of the assumption of the diesel price. Can we just maybe get a quick refresher on just that sensitivity to the diesel price?
Speaker #3: Where do you think the diesel spot is currently? And then are there any measures that can be taken to perhaps changing mind plans or something else in terms of work index that can help shield you a bit in terms of periods where the price for diesel might be significantly higher?
Speaker #1: Yep. Thanks, Raul. Broadly, the consumption of diesel across our business is a litre per BCM. So you can see the total movements of dirt for our business.
Speaker #1: And diesel prices as we've commented on over the particularly last quarter, May was pretty eye-watering in terms of the price per litre. We've got nearly up to $2 a litre on a net basis for us.
Speaker #1: And that's moderated further down, probably now about 1.45 to 1.50 type level at the moment. Our assumption for this year, the midpoint of our guidance, and I think it's important just to state this because it is in the footnote, but let me just highlight it just for a moment.
Speaker #1: Our assumption for this year, our midpoint of guidance cost-wise is predicated on $1.16 on a net basis per litre for the year, average for the year.
Speaker #1: And so we've tapered obviously from where we are today versus where we might end at the end of the financial year. And that's what I was referring to in the challenge of trying to forecast is saying given that we are captive to whatever goes on over there, and we observe it and have as much control as you do over what goes on over there.
Speaker #1: So that's the challenge of it. But that is the context for where we've been in the past. Pre-conflict, we would have hovered around the late '90s to a buck level.
Speaker #1: Per litre. So we are predicting a return to hopefully peace and normality by the end of the financial year, which allows us to get from a tapered basis down to $1.16 on average for the full year for the midpoint of our guidance.
Speaker #3: Got it. That's very clear. Thank you, Paul. I'll pass it on. Cheers.
Speaker #4: Your next question comes from Paul Young with Goldman Sachs.
Speaker #5: Morning, Paul. Morning, Kev. Happy both well. Can we start with the production guidance for FY27, looking at the Queensland guidance, which implies a bit of a fall in the midpoint year on year.
Speaker #5: I know you've stepped through Blackwater having to catch up a little bit and stripping in the second half and do on-air moving to some of the southern pits and longer hauls and the auto haul or automotive trucks, sorry, just commissioning those and getting comfort, etc.
Speaker #5: But are both operations falling a little bit in FY27, or is it more one than the other?
Speaker #1: Yeah. Thanks, Paul. Look, yeah, the guidance is, as we said, conservatively positioned. As you rightly point out, the midpoint is less than what we've done for this past year.
Speaker #1: That's not our that's not our aspiration, of course, in this year. So I could say that Blackwater will be doing a bit more of the heavy lifting this year.
Speaker #1: And Dornier does have to go through a transition here. So there's a bit more dirt being moved in this new year as we start to extend ourselves now and open up the southern domain of Dornier.
Speaker #1: So there's a bit more dirt being done there. And so the mix of the two does change. But we feel like, well, Blackwater is certainly performing reasonably, and we feel like that'll year on year will be an improvement.
Speaker #1: 13.9 last year wasn't where we wanted to be, and that was weather affected. So we feel like there's upside there. But you will see a moderation of the mix as Dornier focuses on the dirt.
Speaker #5: Yep. I can understand. And then a question on cost. I know you didn't split out Queensland and New South Wales. Within the guidance and the result, but I think a quick sort of calque on the second half of Queensland, I think unit costs were about an Aussie 1.45 or 1.48 in that sort of ballpark.
Speaker #5: And obviously, volumes are going midpoints going backwards a little bit. Diesel, we just run through. And previously, you've guided to medium-term I think around 1.45 or thereabouts.
Speaker #5: Anything to comment on those numbers as far as Queensland reporting 1.45 to 1.48 in the half as a new starting base?
Speaker #1: Yeah. We haven't engaged this because we don't provide a breakup on. But you're arithmetic is not a world away from where it is, Paul.
Speaker #1: We feel like we've got good momentum coming into this year from a cost reduction perspective. I think that's evidenced by the 1.32. I think we've done well.
Speaker #1: And our objective here is to carry that into the year. But we're not going to there's lots of execution risk that goes around all these things.
Speaker #1: And you've got the diesel prices we've talked about, ad nauseam already, hovering over us. So our view is that we can work on this cost base in this new year and absent diesel price, we feel like we've got some momentum to drive some further costs out of our business.
Speaker #1: Queensland in particular, relative to New South Wales. New South Wales obviously is not immune to the laser focus that the team is applying on the cost side of things.
Speaker #1: But it's I'll have to say from a cost reduction improvement perspective, it's got less upside if I could say that.
Speaker #5: Yep. Okay. Understood. Thank you.
Speaker #4: Your next question comes from Adam Martin with Evans and Partners.
Speaker #3: Yeah. Morning, Paul. Kevin and team. Yeah. Just back on the costs. I mean, I think you've previously flagged things like maintenance as a medium-term opportunity.
Speaker #3: Perhaps you could just step through and we put the diesel thing to the side. We can all make an assumption around diesel price. But what sort of structurally can you work on over the next one, two years, please?
Speaker #1: Sorry. From a maintenance perspective, Adam?
Speaker #3: Yeah. Maintenance and then anything else if you think it's out there from an operating cost perspective.
Speaker #1: Yeah. Look, I wouldn't say maintenance-wise. We've certainly made a lot of improvements in actually maintenance programs that have been run over the last two years.
Speaker #1: So there's been a handsome amount of savings that have been brought to bear through that. But I wouldn't say going forward we're going to be driving material change in that regard.
Speaker #1: The capex and maintenance and rebuilds programs are crafted around maintaining the quality of the gear and the operation utilization of the gear that we're striving for.
Speaker #1: So we're not cutting any corners there. But we do want to make sure that every dollar spent is well spent. And so that is definitely the focus for that.
Speaker #1: But nothing material to change. There.
Speaker #2: Yeah. I mean, we run a condition monitoring program. And as we get to know the assets better, particularly Queensland ones, I mean, we're continuing to push sort of lives out there.
Speaker #2: So there will be savings in that area.
Speaker #1: Yeah. No. And to your point, I mean, we've spoken about at least the big ticket items with the drag lines, say, for instance, there's been a little bit more money applied to the rebuilds as we've got a closer examination of the condition, as you say, of some of those equipment.
Speaker #1: And we've spoken about in previous quarters about having to apply a little bit more money to each of those rebuilds as they occur. But other than that, I think we should be in reasonable shape.
Speaker #1: The only other thing that I mentioned there earlier sorry, Adam. The only other thing that I mentioned earlier there, of course, is the rail.
Speaker #1: The rail outcomes as being upside for us in terms of cost savings. So New South Wales, of course, we did a very good job there.
Speaker #1: I think initially in terms of bringing down the surplus take or pay exposure on the above rail. And matching that better to the sales profile of our mines in New South Wales.
Speaker #1: And now we've complemented that with obviously an outcome on the Queensland side of things. And a rising has been successful in winning the business for our Queensland operations.
Speaker #1: We've been able to we've been able to eliminate surplus take or pay from that arrangement as well, which has been very positive. And also achieved a cost reduction as well per ton over the contractual period, which is a couple of years obviously on the tail of this existing contract plus the 10 years that follow for the new arrangement.
Speaker #1: So in aggregate, yeah, very positive to see those cost reductions coming to the table.
Speaker #3: Okay. Thank you. Just second question. Arguably, across the capital's reducing your interest costs 9% down to 6. That's as you've pointed out, over 50 million annually.
Speaker #3: Are you sort of thinking about that as being extra that's going to be returned to shareholders or is now the time to sort of consider growth that maybe could update on some of the growth options there, please?
Speaker #1: Yeah. Well, look, I think less expenses, interest or otherwise, results in higher impact, which will drive better return to shareholders. There's no doubt about that.
Speaker #1: We're very pleased with those outcomes. And as Kevin's mentioned earlier, we're now entering the last year have entered the last year not just of the deferred payment, which is 100 million US that we need to pay, but the last year of sharing the revenue as part of that deferred consideration structure.
Speaker #1: And so one quarter is obviously passed already of that arrangement. We've got three more to go of that revenue sharing exposure. And so as mentioned earlier, that now those dollars will now form part of the collective coffers of the expanded group.
Speaker #1: And I think as we guided in the first quarter, so in the June quarter, I think we estimated it was exposures about 50 million 53 million, I think, US in the quarter.
Speaker #1: So if pricing remained the same as that over the course of the year, then there's some 200 million dollars, 210, 215 US, prices come down since then.
Speaker #1: But if you think about that, after this last. Year of the three-year structure, that money finds its way into our bank account, which would be great.
Speaker #1: And stays there. So that's very positive. So it's nice to come to the end of that period. Obviously, prices have moderated from the calculation I just gave you slightly.
Speaker #1: So it may be more in the annualized 170 to 180 million type number. But the point here is that after the end of once we get to April, all the upside in revenue is ours.
Speaker #1: Not shared. And so that's the positive part that we would like to get to the end of to conclude what has been otherwise a very successful structure to the acquisition consideration claims.
Speaker #3: Okay. Thank you. That's all for me.
Speaker #4: Your next question comes from John Sharp with JP Morgan.
Speaker #5: Good morning, Paul Kevin and Anne. Thanks for taking my question. And congratulations on FY26. Those costs just back to cost for FY27. Can you just remind us or maybe let us know what you're currently paying for diesel?
Speaker #5: I think you get about 53 cents off of rebate. Is that correct?
Speaker #2: I think it's really hard to do that. This is Kevin. It's really hard to do that when you look at the Bowser price. The today, we're in the 130, I'd say.
Speaker #2: 130, 135. The real question that's driving this at the moment is crack spread. So if you take a Singapore gas oil price, that actually gives you a reasonably good property.
Speaker #2: Proxy for the diesel price that we're paying, I think. But this crack spreads because crack spreads have gone from traditionally, say, a year ago, they're about $20 a barrel.
Speaker #2: To now 50, 60, 70, 80 dollars a barrel depending upon where capacity exists on the planet. So crude's a contributor, but crack spreads have become an increasing contributor.
Speaker #2: As Paul said, we've got a budget in there that says we expect this conflict to settle over the next year in diesel prices to come back to something more reasonable.
Speaker #2: And that's how you get 100 a dollar, 16, I think, is the guidance that we've got in there that underpins the midpoint of guidance.
Speaker #2: Down from which is a little more elevated in this first half. So that's the story.
Speaker #5: Okay. Great. Thank you for that. And second question, just you finished FY26 at the top end of ROM guidance. FY27 range is a little bit tighter.
Speaker #5: So possibly do you have greater confidence in the Queensland assets now that you've had them for three years to tighten that guidance range? And what's stopping you from hitting the top end of guidance again this year?
Speaker #1: Yeah. John, it's a good question. We feel like we have good momentum. There is a mix of productions I mentioned there earlier, just in terms of Blackwater and Dornier in this new year.
Speaker #1: But we feel like we've got good momentum. And New South Wales, as I mentioned before, has actually done really well by now right now.
Speaker #1: Now is actually performing better. So that's very encouraging to enter the new year on that basis. So we'd love to see that continue on.
Speaker #1: But we are cautious to bank all these opportunities formally in that sense. So I think our objective here definitely is to get to the top end of our guidance, if not beyond, so that would be our objective.
Speaker #1: But how do you set that up at the beginning of the year, given that we are sitting here having had a bumpy ride with Nairobi?
Speaker #1: We've had some significant weather in this past year. We've reflected that in our budgets for this new year. So the corollary of all that is the basis upon which we provide conservative guidance, although we feel we've got no momentum.
Speaker #1: So I understand the point that you're making that we have with that momentum, we should be we should have a positive year volumetrically. And that will also drive a positive year cost-wise, I think the thesis the hypothesis is sound.
Speaker #5: Okay. Great. And just quickly, I want to make sure I get this one right. Just on the last call, and I believe you said that all the supports are coming out to the surface for the long-haul move, but I didn't know whether you meant all the supports that require maintenance.
Speaker #5: So can you just let me know? Yeah. Is it all the supports or is it just the supports that require maintenance?
Speaker #1: No.
Speaker #2: All the supports. No. All the supports will come out, but there is, I guess, a varied maintenance requirement on those supports.
Speaker #1: Yeah. Yeah. Some have had the birthday already and only there's a smaller effort per support to be undertaken, whereas others didn't get the benefit of the first stage of the work.
Speaker #1: So they need a more intensive overhaul. But all of them are coming.
Speaker #2: Yeah. All of them. And I mean, some have some structural stuff that need sort of fixing up and some of that will be, I guess, determined as we get them out and have a look at them.
Speaker #5: Okay. Great. Thank you for that. I'll pass along.
Speaker #4: Your next question comes from Lachlan Shaw with UBS.
Speaker #5: Morning, Paul, Kevin, Ian, and Sam. Thank you very much for your time. And thanks for the questions. Two from me. I just wanted to, I suppose, start at Nairobi.
Speaker #5: Obviously, there's a bit more capital coming up. But last three years, it's been below 5 million tons a year. I'm sure you prefer it to be running at a higher run rate than that, more reliably.
Speaker #5: Can you remind us, when you think about this capital program, refurbishing the long wall, the next change out, etc., getting into the new panels, are you confident there's a pathway back above 5 million tons?
Speaker #5: Is it 5 and a half? Could it get to 6 in two, three years' time? Thanks. And I'll come back with my second.
Speaker #1: Yeah. Thanks, Lachlan. Yeah. Look, our expectation is that once fully overhauled and as we move into panel 205, where we know those the geotechnical concerns diminish, our view is, and we got to ask this question a quarter ago, do we feel still feel confident that Nairobi can return to a 6 to 7 million ton per annum range?
Speaker #1: We do have that confidence. So there's no reason to think that we can't achieve that. We know and we have lived the experience of the underperformance of the last few years.
Speaker #1: So that is we're all very mindful of that. But it's encouraging to see the work that the team are doing and the productivity improvements that we're seeing come from that.
Speaker #1: And that momentum needs to be maintained. It obviously to return to a 6 to 7 million ton per annum outcome. But I think in panel 5, I think there's the convergence of still being shallow, a wall in good shape, and less geotechnical and geological things to concern us.
Speaker #1: The aggregate of those, I think, will see us do much better in 205.
Speaker #5: Great. Thank you. That's helpful. And then just a second question. So I do know a little bit of capital in the guidance for 27 for victory extension project.
Speaker #5: I suppose the question here is, given the better fiscal regime in New South Wales, normalizing thermal coal markets, is the thinking internally around victory extension changing?
Speaker #5: Are you considering potentially accelerating? Or saying differently, where would you want to see GC New Trade sustainably to get more positive on victory extension?
Speaker #5: Thanks.
Speaker #1: Yeah. Yeah. Thanks. Lachlan, I think it's our view on victory hasn't changed. It's prospective. And we feel that the opportunity is there before us.
Speaker #1: It's really about timing. In a lot of ways, in financial capacity, we want to make sure that we've put behind us the cash flow demands that came from the Queensland acquisition, which I think everybody will accept has been excellent for our shareholders.
Speaker #1: And so the next opportunity would be something like victory to come forward. We're using the opportunity now to look at the various ways in which that might be funded.
Speaker #1: We have expressions of support from customers and suppliers who'd like to be involved. So we are examining all those things over the next 12 months.
Speaker #1: Price-wise, do we need to see more than $130? We'd love to, but we don't need to. Is the answer to that question? But again, inflation has taken its part in our industry, as you know, in more recent times.
Speaker #1: So we are taking this time to refresh our view of the costs of running the bigger victory version. It's more expensive than Moors Creek, as you know.
Speaker #1: The strip ratio there is 8 to 1. So it's more expensive. So we just want to make sure that our view of the robustness of that project is updated to reflect the run rates that we're seeing and cost rates that we're seeing in this environment, not when the last time we looked at it.
Speaker #5: Great. Thanks, makes sense. I'll pass it on.
Speaker #4: Your next question comes from Chen Jiang with Bank of America.
Speaker #6: Good morning, Paul and Kevin. Thank you for taking my questions. My first question may be for Kevin regarding your payout. So including buyback, your payout for the underlying net path is around 70%.
Speaker #1: Yep.
Speaker #6: Up the cargo ratio 60%. So I'm just wondering, what's the thinking from the board paying above your target ratio? Is this just a one-off like you are doing this?
Speaker #6: Above payout? And also by looking at the split of buyback versus dividend, it's kind of evenly splitted. But I feel like the market doesn't reward companies doing buyback.
Speaker #6: So and then plus, you have 1.2 billion of franking sitting there. So why not distribute more frank dividends versus buyback? Thank you, Kevin.
Speaker #1: I think I'm going to answer the question this way for you. I think you look at the balance sheet; it's in really good shape.
Speaker #1: You look at the business; it's in really good shape. You look at where we are in the price cycle. And you look at the non-cash charges that are coming through the P&L.
Speaker #1: And you sort of sit there and say 6 cents 5 cents you look at it and say it's actually time to give shareholders a little bit more and signify that the world's in pretty good shape.
Speaker #1: And I think that's probably what I'd say to you about that dividend payment. I don't think a cent at 800 million shares at $8 million is that onerous an ask.
Speaker #1: So I think that's good. The balance of your question, I'm not sure how to answer that, to be honest with you. I think the dividend approach that we've done, Paul talked about, which is I know we've got 1.2 billion in franking credits sitting on a balance sheet, but that's largely sitting there because you've got no access to off-market buybacks anymore.
Speaker #1: And that was a change in federal government legislation. So paying more dividends I think our shareholders would have some shareholders would have a different view about dividends versus buybacks.
Speaker #1: And so I think you'll see us stay within the measured approach that we've got and that we've explained to a market. And so I think we think this business moving forward is in pretty good shape to provide returns to shareholders.
Speaker #6: Sure. So that 70% above payout target of 60% can happen again whenever you think your balance sheet is strong and you have good, I guess, good earnings or good free cash flow going forward.
Speaker #1: I think you should think where we are in a cycle. Coal prices are relatively low and recovering. And so that number is sensitive to the NPAT being delivered from a coal price cycle at this point, the coal price cycle.
Speaker #3: I think the 70% we're not changing our policy to 60%. It's only recently been revised and has been re-presented here today in consistent form from what it is.
Speaker #3: But we have paid over the upper bounds of that payout ratio, which is largely a function Chen as you recall having paid a dividend in the first in our interim of a period when there was meager to little NPAT being recorded in an underlying basis.
Speaker #3: But we have a strong balance sheet. So we thought it was the right thing to do with an improving outlook. That outlook did materialize.
Speaker #3: So I think that was the right perspective to take on the interim. And as a result, we've taken as Kevin said, a sensible approach to the final dividend, which in aggregate lands us at 70% of the underlying NPAT.
Speaker #3: But I don't think we should be inferring necessarily that because we've done that this year, that there's a change to the upper bounds of our policy.
Speaker #3: It's just the opportunity that was presented to us as a result of improving conditions. And a good balance sheet.
Speaker #6: Got it. Yeah, got it. Thanks for that. And the second question, I know a lot of analysts have asked about your course guidance. Sorry, just to dive deeper into your course.
Speaker #6: Guidance FY27 with the big range of $15 per ton. I think that range is similar to what you provided for FY26 despite you delivered at a lower end of the guidance for the last financial year.
Speaker #6: However, looking at FY27, you have $5 saving like a lower year-over-year from the renewed rail contracts plus you also mentioned you have cost down initiative to continue.
Speaker #6: In FY27. So and you mentioned again you can trade lower end of guidance. So I'm just wondering, what is the underlying assumption for that range?
Speaker #6: Is that mainly because of diesel, because you are not sure how the Middle East conflict going to end? What is the assumption for the lower end and the upper end?
Speaker #6: Thank you.
Speaker #3: Yeah, look, I think the one important aspect is that Chen, which you've not mentioned, is underlying inflation. If you look at our business and the inflation rate that's in our industry as opposed to the countries as a whole, you have to actually you start the year knowing that you're going to have to counter three to four percent.
Speaker #3: Inflation in your cost base. And if you apply that three to four percent to the 132, that works out at the numbers you just referenced there, as being so we need to counter that.
Speaker #3: And so all the efforts that we're bringing into this new year and the momentum that we had is necessary in order just to counter that alone.
Speaker #3: Now, the volumetric upside will certainly give us as we are shooting for the upper end of guidance as we did last year, we are shooting for that.
Speaker #3: So to the extent that we can do that, that puts us in the bottom end of the range for sure. That's the way the guidance is structured to make sure that there is integrity.
Speaker #3: So the top end of ROM guides and sales equals the bottom end of cost guidance. You rightly point out that there's some opportunities for savings.
Speaker #3: Most of that is banked into that. But it is there at least to counter inflation as we say. We've taken a view on diesel, which we've embedded in the budget at the midpoint at $1.16.
Speaker #3: We hope that that's better than where we've assumed it to be. But okay, that's something outside our control. So we feel comfortable. It is conservative.
Speaker #3: We're accepting of that. We've said that at the outset. And we look to outperform the range we've given you.
Speaker #6: Great. Thank you. Thanks for the color, Paul and Kevin. I'll pass it on.
Speaker #2: Your next question comes from Glenn Lockhart with Baron Joey.
Speaker #4: Morning, Paul. I was wondering if we could talk about something completely different to Cole and maybe talk about rare earths because Kevin dodged my question last month when he said you spent all your free cash flow on rare earths.
Speaker #4: Just trying to understand what your intention. I mean, is this a passive investment, an active investment? Are you thinking you want to be a producer of rare earths at some point or a silent partner and just provide funding?
Speaker #4: If you could maybe help us spend a couple of minutes talking about where you and the board think Whitehaven fits in the rare earth picture because I noticed you've now changed your name just to Whitehaven, dropped the coal.
Speaker #4: So obviously, you are thinking of diversification. So maybe just talk about a little bit. Thanks.
Speaker #3: Yeah, starting to sound like a media organization there, Glenn, rather than the analyst. The dropping of the coal name has got nothing to do with that, first and foremost.
Speaker #3: That's just a contemporization of branding of the company, which everybody knows who we are. Everybody knows there's no notion that we're not something else other than a coal company.
Speaker #3: We love being a coal company. Very proud of it. But the branding Whitehaven, everyone just refers to you as Whitehaven. Nobody says actually Whitehaven coal.
Speaker #3: So that's just reflective of that. Look, I know look, we spend a few dollars on holding our position there on our rare earths investments.
Speaker #3: That has been that has paid well. And so that's very positive. Use of funds in that sense, as we've talked about in the past, this is a longer-term strategy looking at the opportunities of diversification.
Speaker #3: And particularly as it relates, as I've mentioned in the past, and I know we've talked about, what trends would manifest themselves in a reduction, say, for instance, consumption of, say, for instance, thermal coal.
Speaker #3: Now, our thermal coal business is excellent. And if you want to project yourselves out to the future into some darker scenarios, then we'll be the last ones to turn the lights out because we've got the best quality in the long slides.
Speaker #3: And so but those same trends, we shouldn't just ignore them. We should think about them and think about how do we position the company relative to those trends.
Speaker #3: And where would the company otherwise be if we use those influence, those trends and continue to be obviously mining, where would we position ourselves to do that?
Speaker #3: So we've given ourselves a small this is de minimis in terms of the overall size of the company. But it's important to hold a position whilst we do the important work of analyzing these individual opportunities and where they go.
Speaker #3: Clearly, in more recent times, changes from a geopolitical perspective has put a excuse the pun, a fire under the rare earths sector. And drawn a lot of focus to it.
Speaker #3: So in more recent times, it's probably taken on a greater prominence than probably should, given the size of it relative to the business. But there's lots of momentum, obviously, behind the discussion to try and for the Western world, if I could say that, gain more independence from the dominance of the Chinese particularly, not just production, but obviously more importantly, the processing side of rare earths.
Speaker #3: So we've taken a position here. It's small. We continue to study it and the market. And where it goes, we like what we see in the investments that we've taken, small as they are.
Speaker #3: And but as I say, this is a longer-term objective. That we want to explore greater opportunities in this space. And we continue to do our homework and learn as we go.
Speaker #3: But it's so far, it's been very productive exercise from that perspective. And the funds have been well, the investment has been rewarded in the short work.
Speaker #4: So Paul, I mean, is it mean you could see yourself as a producer one day? I mean, it's quite a capital-intensive industry and quite technically challenging relative to coal, I would have said.
Speaker #3: Yeah, sure. Sure. But that's not capital-intensive as all mining is, but not capital-intensive the likes of large-scale mining in the coal sector is, not at all.
Speaker #3: In fact, and a lot of those smaller companies don't have the ability to solve those capital asks themselves. And so oftentimes, well, more than oftentimes, they seek a larger partner to assist them in that.
Speaker #3: Now, and a scale of Whitehaven's size, this could assist in that regard. But it's all about having the right seat of the table with the right deposits.
Speaker #3: And so that's the potential in the future. Glenn, in terms of us assisting to solve that, I don't think we're here just to be a passive investor longer term, I can say that.
Speaker #3: If it wasn't prospects of our mining skills being useful in that regard, then that would change the nature of how we view these things.
Speaker #3: But we don't profess to be the experts of beneficiation of rare earths. We're not doing that. We're this is definitely an opportunity to learn more about it.
Speaker #3: And in the meantime, the investments are returning well whilst we're doing that.
Speaker #4: Okay. And then maybe just. Joining and you've talked a lot about the challenges with joining and moving to the new mining area in 2027.
Speaker #4: Does that mean it's permanently downgraded relative to 2026, or is 2027 because of the move just mean you step backwards temporarily? Just trying to think about how does it feel sort of longer term or medium term.
Speaker #4: Thanks.
Speaker #3: Yeah, good question. No, we don't feel like longer term we've got any issues. I mean, at our current rate, we've done well. And that's exceeded the average of the five years.
Speaker #3: That we gave at the time of the acquisition. So that's very positive. But we do want to balance if we don't put any more gear in there, say, for instance, which we're not, we need to then balance the total material movement balance between dirt and coal.
Speaker #3: And if we're going to open up the southern region, which we must, the weighting of that changes in the short term for sure. So yeah, a little less out of Dornia, but you get more out of Blackwater.
Speaker #4: All right. Thanks, Paul.
Speaker #3: Thank you.
Speaker #1: Your next question comes from Lachlan Shaw with UBS.
Speaker #4: Oh, morning. Thanks for taking my follow-up. I just wanted to ask the cost question, perhaps a different way. If you look at the guidance for 2027, how much of the midpoint, how much of the lift year-on-year would you say is controllable, i.e., things that you can do something about, or versus the uncontrollable exogenous factors?
Speaker #4: Thanks.
Speaker #3: Broad question. You want to try and narrow that down a little bit, Lachlan? I think we spoke about the diesel part of it. And so we've given you a sense of where that is.
Speaker #3: That certainly speaks to that's an important.
Speaker #4: Yeah, so sorry. Yeah, so let's say diesel FX, these are things outside of your control. Industry inflation I get, but I suppose I'm thinking about productivity cost out, technology, not sure.
Speaker #4: I suppose that's the question really. What embedded in that guidance, what sort of programs or measures can you take? Are you planning to take to sort of mitigate those broader industry-wide and exogenous factors that are perhaps going against you?
Speaker #3: Yeah, look, it broadly covers those things that you've mentioned and more the whole business, whether it be organizational structure, whether it be maintenance practices that we talked about earlier, streamlining those, across different fleets, different approaches, different ages of equipment.
Speaker #3: There's a whole range of areas where we look at productivity as a key to driving change across all our assets, we're seeing improvements in New South Wales, as you can see.
Speaker #3: The Queensland assets have responded nicely. And the challenge for us is to keep that going, right? Because you take the 80/20 rule does apply here.
Speaker #3: You take the easy licks quickly and then the nitty-gritty of sustaining improvement over time, then is what you need to focus on. And that's where we are.
Speaker #3: So I don't think we're going to be making the big strides that we've made volumetrically in the first two years in years three and four.
Speaker #3: But we're certainly going to improve in productivity as the place and productivity will bring our costs down. That's not to say within the absence of another cost target, in this third year, we're not focused on absolute cost reductions.
Speaker #3: We still are. But that's in our guidance rather than being a separate area that we commented on in the first two years. We thought that was necessary just because the cost base that we inherited versus the one we now have.
Speaker #3: But we'll just normalize that now in our cost range.
Speaker #4: Yeah, I mean, Kevin touched on it earlier on. I mean, nothing's off the table. Well over 100 initiatives, and I can go all the way from have we got too many buses coming to and from site to the bigger ticket items of productivity, major contracts, and everything in between.
Speaker #3: Yeah. Yeah.
Speaker #2: And I'd probably finish that by saying the 25 and 26 program are really building within the business a culture of scrutiny on costs. And that's probably the thing that I'd look at and say is the thing that will actually deliver in years and years to come.
Speaker #3: Well, I think the rail example that you've used, you've cited another one there in just in terms of buses. I mean, right sizing the contracts for services to these two assets in Queensland has been a significant body of work and will continue in this year.
Speaker #3: And when I say right sizing, they were part of a bigger portfolio, which is part of bigger contracts. So it had a different disposition in terms of tailoring or matching the day-to-day needs of a particular service or contract to your underlying needs.
Speaker #3: And so we that you mentioned buses, that was a good example. Camp accommodation is another good one. Camp accommodation, there's a baseline of people that go in and out of the site on a daily basis.
Speaker #3: But there are surges which occur when you've got major shutdowns and things for contracts and so on that turn up to do that important work.
Speaker #3: But you don't need to be carrying rooms for those people throughout the entirety of the year. You get them when you need them. And if you can get them when you need them, that's how you should approach that.
Speaker #3: So there are other examples where we've been able to take savings where again, just right sizing these contracts for the nature of the business we've acquired.
Speaker #4: Understood. Look, that's really helpful color. Thanks again, team. Thank you.
Speaker #1: Your next question comes from Paul Young with Goldman Sachs.
Speaker #4: Yeah, hi again, Jens. Just a housekeeping question on the guidance, actually a sales volumes. Just noting that or observing that managed coal sale guidance in New South Wales is falling I think 700,000 tons or so at the midpoint year on year, yet productions not expected to fall.
Speaker #4: And I'm looking at your inventories and your balance sheet, Kevin, and I was sort of flat half on half. There's obviously movements on how you measure those inventories from a cost perspective and etc.
Speaker #4: But is this simply just having to rebuild some run of mine and just stocks along the chain at both moles and narrowboy in FY27?
Speaker #3: No, I don't think so. I mean, my sense of New South Wales or my understanding of New South Wales is there'll be a little more well, sorry, the Molls Creek numbers are fine.
Speaker #3: The narrowboy numbers we've talked about, the question is what is the yield that comes out of the gun of our apron cuts and how hard do you wash that?
Speaker #3: We're carrying good stocks into the year. So no, I wouldn't be trying to read too much more into this or.
Speaker #4: Right. Okay. Yeah. In that case, the bottom end of the range seems a little bit really conservative in that case you're saying based on everything you're seeing across the chain and yields, the outlook for yields, etc.
Speaker #3: Well, I don't think really conservative is the answer. I think if what we've given you is the a range of production and we're shooting for the top end of that guidance.
Speaker #4: Okay. All right. Thanks again.
Speaker #1: That is all the time we have today for question and answers. That concludes our question and answer session. I'll now hand back to Mr. Finn for closing remarks.
Speaker #3: Thanks very much, everybody, for attending today. Listening to the presentation, the good question and answer session that's ensued appreciate all the interest in the results for the year.
Speaker #3: We're happy with the outcomes of the years as we've mentioned. But we look forward to having more discussions with you over the next couple of weeks as we engage individually with you and talk through your questions or not just about this past year, but also the outlook for this new year.
