Good morning, everybody, and thanks very much for joining us for our half-year results presentation for FY25. I appreciate you all taking the time. I'm here with our CFO, Kevin Ball, as usual, and of course our COO, Ian Humphris, for any questions and supported here, of course, as always, by our investor relations team in the room. I'll go through the presentation, and Kevin will deal with a bunch of slides here in relation to certain sections of the presentation, and then we'll get to Q&A because I'm sure there's going to be a few questions. And I know you've all got a busy day, so I'll try and get right through it with many companies releasing results today.
I do want to just momentarily at least draw your attention to the fact that, as you can see from the presentation, there has been a bit of a change in terms of the branding of the company, so Whitehaven has refreshed its brand. I don't want to make too much of it, and for those worried about costs, it's not an expensive exercise. We've been very frugal in doing that, but we have modernized it and given it a nice contemporary update, and you'll see a bit of a change there. The business has doubled, so we've taken our triangle and added another triangle, so we've got two triangles, and we've rotated 90 degrees to form our W, so if I've lost all of you with the marketing speak, just go to our website and have a look, and you can see how that works.
But we think the company has changed. We've entered a new chapter over the last 12 months, and a contemporary branding and refresh we thought was appropriate given the transformation of the company. But we're still coal. Coal is in our DNA. Very proud of the industry we're in and the business we've created. So no change in that regard. Over the page is the usual disclaimers because we do have some forward-looking statements that are involved in this presentation, so I draw your attention to that. And then we'll get over to the highlights. Dealing firstly with safety. Safety results at our TRIF at 4.9 is a solid start to the year on a combined basis, being this our first full financial year of our expanded footprint.
So 4.9 was definitely a good result, but there's no doubt in our minds that there's more work to be done here in making sure that our expanded footprint, everybody's working together across the same standards with the same safety systems. We know we can do better than 4.9. On the environmental front, we're entering our third year now of zero enforceable actions on the environmental front. So very pleasing to see that progress continuing. If I move over now to the operational and financial results for H1 for FY25, some of these numbers will be familiar with you already. 19.4 million tons, obviously, for ROM production and 14.2 million tons of equity sales. We've effectively doubled our volumes and sales with the addition of Daunia and Blackwater.
We've achieved, as you know, an average price of AUD 232 across the group, being AUD 247 for Queensland and AUD 211 for New South Wales. Unit costs have done well. So first half, we're at AUD 137. That's total costs, not mining costs, and which is below the bottom of our guidance range. So we're tracking very well there and encouraged to continue that momentum for the balance of the year as well. Revenue of AUD 3.4 billion with 64% metallurgical coal sales and 36% on the thermal side of our business. Underlying EBITDA was AUD 960 million. Very good result. Queensland contributing AUD 588 million to that. Underlying NPAT of the business was AUD 328 million for the first half. Certainly seeing the benefits now of a bigger business with scale and diversified across both met and thermal products. We had AUD 32 million of acquisition-related costs in there and transition costs pre-tax.
We've reported AUD 326 million of non-cash-related financing adjustments in relation to FX adjustments and also discounts, discounting unwinding through our finance line. So Kevin is going to pull that apart for you with some slides a little bit further later on. We are going to pay a fully franked dividend of AUD 0.09 per share, which will be paid on the March 14th, representing a payout ratio of 37% of profits from the New South Wales business in line with our stated dividend policy. We've also announced the resumption of a modest share buyback of equal value in dollar terms, being AUD 72 million, which will be executed over the next six months. On a combined basis, the return to capital represents 44% of a payout ratio for the underlying group NPAT for the half year.
The board's confidence to reinstate the buyback at a modest level at this point was certainly influenced by the confirmation of on-time formation of our joint venture at Blackwater, coupled with recent share price movements, you know who you are, which made the buyback look very compelling from our perspective. Now, just over to these charts on our revenue. You understand this. You've seen this before, but just confirming again, metallurgical coal. We have clearly transformed our business. The revenue share is 64% versus 10% metallurgical coal for the previous year. Japan certainly is the premium bedrock of our business, and on our expanded footprint, still represents 50% of our sales. But if you look to the right there and look at those sales, you can see there's a nice spread of other customers and emerging markets, which bodes well for the future.
India now 11%, China 11% of volumes, all metallurgical coal sales in those two markets there. Korea, Malaysia, and Taiwan in aggregate about 20%. And in the case of Korea and Taiwan, moving more into the metallurgical coal space as well, having historically been more thermal-based markets for us. So the acquisitions, as I say, is delivering diversification benefits and looking very positive for that spread of new jurisdictions, all which have nice growth opportunities in them for the future. Once again, these charts will be familiar to you, so I won't really dwell on them too much. Global supply and demand on the left-hand side there in terms of the high CV thermal market and the same for the metallurgical coal market on the other side. Certainly, these Commodity Insights graphs depict an interesting drop-off in supply, but growing demand at the same time, giving rise to those deltas.
You can see there are 139 million tons on the thermal side of things out to 2040 and over the same time horizon, a 74 million ton deficit on the metallurgical side of things. I think the interesting trajectory here just on the left-hand side in particular is the run-off of available supply of high CV thermal, which we're certainly very well leveraged to and look forward to capturing the benefit of that delta as it continues to expand, driving prices in the right direction for us. I'm over now on the market condition slide. Now, there's a lot of stuff in here, so just bear with me as I get through it. I thought we'd just cover off on some of the dynamics.
Demand for our met coal and also thermal coal is very strong, so we're not seeing any changes in there despite what we'd say is a relatively soft market. On the thermal side, we've obviously got long offtake agreements there, which allow us to move our way through cyclical changes pretty well, and pricing and premiums remain good based on that contractual position. I would say that if you're trying to move incremental tons outside of that and you've got high CV coal, the best you can see at the spot market at the moment is a GC flat outcome. But that's if you're uncontracted and looking to move incremental tons. On the met side of things, met's actually been relatively resilient, although we'd like to see the Indian market pick up a little bit more, and we certainly had expectations of that.
Having said that, there's obviously lots of cheap Chinese steel in the marketplace, and I think that is putting a little bit of a weight on the market overall. But for the first half, the PLV averaged about $206. As I say, for Queensland, we got AUD 247 for the sales in Queensland and AUD 211 for New South Wales. Excuse me. Now, just a note, just worth noting just on the contingent payments for our Queensland acquisition, that number previously advertised in our quarter had been tracking around the AUD 33 million mark, I think. But given the softness in the market, we think that's going to come off a little bit further. Excuse me. On the cost side of things, as I say, AUD 137 is a good result.
We think that with the momentum in the second half, we can continue to keep our costs down the bottom end of the range. So very encouraged to continue to do that. We're certainly seeing productivity and cost-out opportunities materialize in the results we've got to date. And in Queensland, we see further upside of being able to continue that pathway into the future. I do note that our New South Wales cost base is going through a period of temporary higher costs, and we thought we'd draw some of that out for you and highlight some of those dimensions of that to you and when those costs might be alleviated. And Kevin will go through that in one of these slides a little bit later on. I'm over now to the operational side.
Again, I won't dwell on this too much because you've seen both of the slides on New South Wales and Queensland. But just to reiterate, 19.4 million tons for the first half on a managed ROM basis and 15.8 million tons on a managed sales basis across the business as well. So ROM basis 90% up on period on period and doubling of our managed coal sales. Splitting this apart a little bit, New South Wales, 9.4, good results. A little bit less than our period on period, I have to say, but that is in accordance with our plan. All mines operated well in their plans, if not better on their plans. And certainly a little bit more weighting of the open cuts to the second half than there is in the first half.
Narrabri, as you know, goes through a longwall in this half, and Vickery is ramping nicely. On the Queensland side of things, again, 9.9 million tons. This bears well compared to traditional performance of these sites. I won't dwell on that too much, but both sites doing well. Blackwater certainly doing better, and Daunia certainly showing some real signs of improvement here, which is very nice and numbers in the first half, which they haven't seen for many years. That's very, very encouraging. We're excited to see where we can take this in the year. In aggregate, ROM and sales certainly pointing towards the upper end of our guidance range. With that, over to you, Kevin.
Yeah, thanks, Paul. Let me start with earnings for the half year. We reported AUD 960 million of underlying EBITDA.
The D&A side of that, we've given you some guidance in the back of this pack on how that will run for the rest of the year because I think that's a point of education. It was AUD 340 million, which is AUD 107 million for the New South Wales business, which most people understand, and then AUD 233 million for Queensland, which reflects amortization of acquisition costs. We had an underlying net finance expense of AUD 151 million, which is about AUD 100 million relates to the interest payments on the $1.1 billion credit facility, and the balance of about AUD 50 million is drawn from leases, interest charges on provisions as they unwind, and amortization of upfront fees, and that gets you to an underlying income tax expense of about 30% or AUD 141 million, which gets us down to AUD 328 million in NPAT.
There were AUD 22 million of post-tax transaction and transition costs, and this is predominantly IT systems and some restructuring redundancy costs as we optimize the Queensland operations. When we stood SAP up in Queensland, we stood it up in five months, and we naturally understood that this was going to take a little more work to flesh that out over the balance of fiscal year 25. So that's what you see in that number. And the followers of Whitehaven will know that we now have U.S. denominated debt, cash on our balance sheet, and deferred consideration to BMA. They're all expressed in U.S. dollars. So as the Australian dollar fell from about 0.66 at June 30, 2024 to about 0.62 at 31 December, the U.S. dollar denominated cash and debt needed to be adjusted to that current rate. And that's what really led to the underlying non-cash.
There are also discount unwinds on the deferred consideration and the contingent consideration. You can see all that set out in note 4.2 to the financials, which will give you all the detail. Once again, they're all non-cash adjustments. In years to come, as that Aussie bounces around a little bit, you'll see that come through in these adjustments to underlying financing costs. Over the page onto slide 16 and looking at the five-year financial graphs, you really can see that FY22 and FY23 were years that enjoyed record thermal coal prices. Arguably the first half of FY25 represents a more average pricing outcome, albeit that we think met coal market was relatively soft. We said we expected the GC NEWC to be fairly resilient in that AUD 120 to 150 range, and it was in half one FY25 at $139.
But the PLV hard coking coal index averaged 206 for the first half, and we believe that's soft relatively speaking. So with a half-year underlying EBITDA of AUD 960 million, or close to AUD 2 billion annualized, you can see the significant scale benefits coming through from acquiring Daunia and Blackwater. With met coal revenues accounting for 64% of our revenues, you can see the acquisition has provided Whitehaven with substantial diversification benefits. And this is in a year when Whitehaven has temporary higher costs, as Paul flagged, and I'll talk you through this cost position in the next slide or two. So what this means is these results are translating well into cash generation, and that really does put the board in a good position to reconsider Whitehaven's capital allocation framework at the end of FY25.
Of course, we see the proceeds from the sale down of Blackwater coming in on the March 31st. That $1.08 billion will help with the balance sheet and increase flexibility. And our net debt position at December 31 of about AUD 1 billion will soon reduce when that $ 1 billion comes in. And of course, we still have to make that first of the deferred payments to BHP Mitsubishi on April 2, 2025. So segment results on the next slide. On a revenue basis, Queensland contributed AUD 2 billion in the first half, being close to about 60% of our overall revenues. So this is again the scale benefits coming through. And the EBITDA contribution from Queensland was AUD 588 million compared to AUD 395 million of EBITDA from New South Wales business.
The first half of the financials show me the benefit of the diversification in product and in markets and of the increased scale of Whitehaven's business, and we did all that without issuing a single Whitehaven Coal share. We know we can do more in the years to come as we continue to simplify and reshape the Daunia and Blackwater mines. Over the page, we're giving you the EBITDA margins. A AUD 67 a ton margin on 14 million tons of sales is attractive, but there's a lot going on in this slide, so let's try and have a closer look. We think we can continue to improve our costs. I think we keep saying that, and our revenues.
At the group level, we realized an average price of AUD 232 a ton for 1H fiscal year 25 and a unit cost of production of AUD 137 a ton with an average realized royalty of AUD 27 a ton. In Queensland, royalties averaged about 13%, while in New South Wales, the average royalty rate is closer to 10%. I would say to you that on the cost side, when we set guidance at 140 to 155, we knew fiscal year 25 would be a higher cost year, and we'll talk through that. You can see those New South Wales operations points at the top of that slide, so Daunia and Blackwater both delivered first half results that we are very pleased with. We've got productivity improvements coming through at each operation, and there remains room for further improvement.
We're on track with our plans to reduce costs in Queensland at the annualized run rate of AUD 100 million per annum by the end of this financial year. And we're seeing cost efficiencies coming through from streamlining operations, including reducing duplication, reducing travel and accommodation costs associated with fly-in fly-out workforce. We're also seeing improvements in maintenance programs and in scale and other benefits from procurement. At Blackwater, we're rebuilding blasted inventories, and we're rebuilding pre-strip inventories. Both these initiatives are expected to support productivity improvements and more sustainable production volumes in the future. As Paul said, in New South Wales, we are in a higher cost period, but we expect to see improvements. And on this slide, we've provided you with additional context and timing around that. New South Wales volumes and unit costs in the first half reflect current mine sequencing.
We're mining through the hill at Tarrawonga, which comes with a higher strip ratio, and that'll continue into next year. And as you know, we're digging the box cut at Vickery as part of early mining. So costs are naturally higher at Vickery for a few years. In the first half of this year, we had a strip ratio at Maules Creek that was about one turn of strip higher than our full year. So we expect the second half from Maules Creek to be contributing with a lower strip ratio. We've talked about incurring additional port and loading charges at NCIG as the shareholders agreed to increase those charges so that the NCIG could accelerate its debt amortization. Across New South Wales, these charges, we're paying an additional AUD 4 a ton.
Once the senior debt is fully amortized, which is around fiscal year 2030, we would expect about AUD 9 a ton to come out of the New South Wales cost base. And finally, as we close Werris Creek and volumes at existing mines have moderated, we've seen unit costs increase because of underutilized take-or-pay costs on the rail and port. We're in the process of renegotiating our New South Wales rail haulage contracts to better align with our actual volumes. And when we do this, we expect New South Wales unit costs to produce or to reduce by about AUD 3 a ton in fiscal year 2027. So we see this as temporary. On the port side, over and above the NCIG debt amortization, we're seeing about AUD 2 a ton of additional costs because of underutilized take-or-pay volumes.
We don't expect this to change much until we see volumes from full-scale Vickery or the volumes lift from the existing operations. So I hope that gives you a bit more color about those costs. Come over the page on the EBITDA in the first half. I love this slide because this really tells me. We had AUD 632 million in EBITDA in the New South Wales business in first half of fiscal year 2024. And with coal price change, with sales volume and costs, that fell by about AUD 236 million, but with the Queensland acquisition, we've added AUD 588 million of EBITDA, and that's gotten us to this AUD 960 million for the half year. Net debt of AUD 990 million. At the start of fiscal year 2025, we had a net debt position of about AUD 1.3 billion, and by the end of the first half, we had about AUD 990 million.
Cash generated from operations was a solid AUD 922 million. And we paid AUD 110 million in interest. We received a tax refund of AUD 12 million. We paid a total of AUD 245 million in CapEx and other acquisition costs. That's a combination of a couple of things. We bought a seat at the table at DBCT that cost us in the early 20s. And we made a AUD 16 million payment to EDF for the final payment to EDF for the acquisition of the 7.5% in Narrabri. And again, we paid AUD 104 million to shareholders being the 13% final dividend in FY24. There are about AUD 160 million of loan repayments, ECAs, and lease payments. And then there's a little bit of tidy up there in the foreign exchange. So we finished at AUD 989. That AUD 989, I'd expect when we get the $1.08 billion , that will be quite strongly placed. So liquidity.
I'm confident there are a number of people who've been running around in a softening coal price with a view about liquidity in this business, but I'd say we're lightly geared. We're prudently geared. We maintain a strong balance sheet, and historically, and since we acquired Daunia and Blackwater, we've maintained sufficient liquidity to comfortably meet our commitments, and with the receipt of the proceeds from the sell-down of the 30%, our liquidity will again improve. Our leverage on a trailing 12-month basis is less than half a turn of EBITDA. In the second half of fiscal year 2025, we paid the AUD 363 million of stamp duty on the January 2nd, and we'll have a little bit of tax to pay on this Blackwater sell-down, but we're well positioned to do that.
Somewhere in 2026, I'd expect us to reposition our funding sources and structures over time to take advantage of what you see as a really strong balance sheet with strong leverage, strong gearing, and strong liquidity. So we've got great relationships with capital providers, and we'll look at that in 2026. Let me hand back to Paul to comment on the capital allocation framework.
Thanks, Kevin. The capital allocation framework is serving us very well, has been consistent for many years now, as you know. This slide is familiar to all of you, and it underpins the disciplined approach that we've taken to sustaining and growing our business and returning capital to shareholders, be that through dividends and buybacks. As I mentioned earlier, today the board has declared a 9% fully franked dividend and an equally sized in dollar terms buyback to be executed over the next six months.
As we've mentioned before, the board will be reviewing in its entirety the parameters within the capital allocation framework. The framework itself we're very happy with, but the parameters in terms we set the payout ratios and so on. As we previously said, we'll review that in full at the time and release that to you at the time of the full year results for this year. That process remains on track, but of course, the sell down opportunity and confirmation of the timelines for that did give the board the opportunity to reinitiate the buyback at this earlier juncture. Again, the dividends, first half to second half, our usual practice is to be a little lighter in the first half. The board likes to see the full cash generation from the business and wants to keep an eye on the full NPAT outcome.
We'll be a little lighter in the first half versus the second. Just back on the payout ratios, that's 37% of the underlying NPAT for the 9% dividend, 22% of the underlying NPAT of the entire group. If you add the buyback of AUD 72 million in there, then the payout ratio is 44% of the underlying group NPAT for this half year. Just moving over to guidance quickly, nothing much changing here. Guidance remains as it was, with one exception, of course, now with the confirmation of the joint venture formation. There's a small adjustment to equity coal sales to take into account, obviously, the formation of the joint venture on the April 1st, where we obviously only retain 70% of Blackwater for the balance of the year there on in. But as far as the quarter goes, the remaining quarter of our guidance.
So there are some small adjustments for you there to take into account as it relates to equity coal sales. Now, there are small adjustments also there on costs of coal and also total CapEx, but we view those to be relatively modest in the context of things. So we've just left those the way they are, but there will be some small adjustments to the good side of that, both those metrics as we get to the end of the year. And I'll just take you to our focus for the balance of FY22 slide. Now, this again, this is a little busy, so I'll get through it. Just bear with me.
There's lots going on in the business, as you can tell, but I hope you get a sense that just from the discussion with the capital allocation framework and what we've done in this six-month period, we do keep an eye on the wood for the trees. But this is indicative of the amount of work that's going on in the business today. And you would expect that that's the case given the size and change of the business. Delivering safe and productive operations is absolutely our focus, both in New South Wales and Queensland. We need more consistency in that front, and I know we can drive our safety outcomes down, as we said earlier.
Cost out initiatives in Queensland are going well, as Kevin mentioned, and we remain on track for the AUD 100 million reduction in our Queensland cost base on a run rate basis as at 30 June. That's how we'd like to enter the new financial year. Ramp up in Vickery is going well. We're preparing well for the change out at Narrabri. The one thing we haven't been able to get to you, so my apologies for that, is that we did say we'll be revising our stage three CapEx for you, but that will be a little bit delayed for a month or two. The only reason for that is just that we obviously go through the motions with our friends in our joint venture. There's more people involved in that process than just ourselves, as you understand.
So there will just be a little bit more time just to bottom that out. But I can tell you that there are hundreds of millions of dollars reductions in capital there, whether they be absolute reductions and also deferrals of CapEx as well. So that will be very positive. We'll get that to you shortly. As far as the products go, Blackwater and Daunia, as I mentioned earlier, the qualities of the products as published previously have been revised, and we've circulated those with customers, and that's getting a very positive reception. So we do expect to see realizations improving over time. Obviously, as I mentioned in the last call, the customers who already have the coal understand what they're getting, and we're obviously just having a discussion with them about paying for all the benefits of that. Whereas new customers, the conversation starts at a different level.
And so we are seeing incremental change there in realizations with new customers and also with the existing as well. At a group level, there are lots of things to be done there. Obviously, IT and internal reporting, there's lots of things going on as we bring the business together. The business is still on two different systems as far as the IT goes, New South Wales versus Queensland. We will address that over time. And completing the sell down of the joint venture formation for Blackwater, that's very exciting. The March 31st is now the date confirmed for all to see. But there is a little bit of work that's required from our side just to make sure that all comes together, joint venture formation, reporting, and so on that goes. We're all over that, so we're well onto that.
But overall, I'm very pleased with what's been a very good and strong first half of the year. We've set ourselves up well for the full year. As I say, our guidance is tracking to the better end of our guidance on pretty much every dimension, which is very positive. And it's nice to have turned the corner to the second half with some good results behind us. The Capital allocation framework has allowed us to draw in some flexibility to that, so I hope that's welcome news to our shareholders. But we will remain diligent to drive the outcomes and cost reductions that we expect and to make sure that we generate the maximum returns for our shareholders over time.
So with that, I'll just thank our people for the hard effort they've put in this year, the board for its support, and shareholders for their ongoing support of the company. So with that, I'll hand back to the operator for the Q&A session. Thank you.
Thank you, sell side analysts. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. 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. Your first question comes from Adam Martin with E&P. Please go ahead.
Morning, Paul. Kevin, just on unit costs, obviously looks pretty good result in the first half. You've maintained guidance there for the full year. I suppose what's driving that is that conservatism. Are you worried about weather? Perhaps just talk us through that, please.
Yep. Thanks, Adam. Yeah, look, we did certainly position our guidance in a conservative way, and so we gave it a little wider based on the fact that we had doubled our business and two very new assets turned up in our budget with relatively short amount of time to actually pull the budgets together, so acknowledge the conservatism there. Having said that, I don't want to take anything away from the team in terms of what they've done from a cost out perspective and a productivity benefit. Both sites are, as you can see in Queensland, performing well relative to the historical context, so we're keen to keep that going. Obviously, weather, as you say, is a feature, and in more recent times, we've had certainly some weather just the tail end of the quarter.
And then since the quarter closed as well, we've had more weather, as everybody knows. Certainly, in the month itself, it's been more than we would expect in a given month. But on a year-to-date basis, we're actually doing okay in terms of our allowance of weather days, if you like, if I can call it that, weather days relative to how many days we've lost year-to-date. So that gives us the confidence to keep our guidance where it is and continue to say to you that we think we'll be in the upper end of our guidance ranges, which is positive.
Okay, no. Thank you. And just a second. And just a second question, just on costs. I mean, you've got a couple of hundred million target. It sounded pretty positive just the way you were talking about it. But I mean, just part of a rough split of what you're sort of seeing, sort of people versus maintenance. And do you think that target is sort of risk of improving at the end of FY25?
Yeah, look, there's a whole range of projects that underpin that AUD 100 million project. And it ranges across a number of different areas, as you mentioned, procurement, maintenance, and people. So we feel very confident we are able to deliver that. So far, the team's doing a great job in managing that themselves on site. So their ownership of that is actually very encouraging and continue to drive that in a way that makes us feel that we'll get to June 30 with a rebased business with AUD 100 million less. But there's probably 20 to 25 projects in that list.
So I won't try and recite them all for you, but it's tracking very nicely. And you can see the benefit in our costs already. It's not miraculously going to appear on June 30, but you can see our costs certainly improving along the way.
Okay, thank you. Let someone else go.
Thank you. Your next question comes from Rahul Anand with Morgan Stanley. Please go ahead.
Hi, morning, Paul, Kevin, and team. Thanks for the call. Two from me. Look, firstly, perhaps a more forward-looking question for you, Paul. Just wanted to test. You've obviously talked about how the supply side looks or the supply-demand balance looks tighter for high-CV thermal coal. And last quarter, you had a 60-40 split on met and thermal. What's the flex, I guess, in the NSW business to perhaps go down that path a bit more and perhaps do majority or all of its thermal, even in future periods, even bringing sort of Vickery into the mix, which currently sits at about 60-40? And that kind of perhaps creates a bit more positive pricing for your Queensland products anyway in the semi-soft end of the market. Just wanted to test that theory a bit and how you think about that, given you're outlining that supply-demand imbalance more in the thermal side.
Yeah, thanks, Rahul. That's actually a good question, but it probably takes longer than I got to answer that one because there's a lot to that. On the supply side, we definitely see constraints on the supply side.
As I'm pointing there in terms of the high-CV thermal market, there's a run-off there that's more aggressive than you can see on the met coal side of things. Our capacity to switch semi-soft in New South Wales into the thermal market is more we have absolute, if I could say that, control of that, if you like, in terms of what we can do. Historically, you would have seen the met coal split in the New South Wales business higher. In the last few years, of course, we've been talking about that in great detail, and 10% revenue last year is indicative of where that has sort of gravitated to. So if we need to switch more, we can, Vickery included. Vickery semi-soft will be better than Maules Creek. So that may be a little stickier in the market. People will want that.
But again, this is just an economic question. If there's more money in selling it as thermal, then you've seen us do this in the past, we'll do so. Queensland semi-soft is different. It's qualitatively better. And so it does sit in a different market with different pricing. And that really being a function of the fact that these are real met coal products that come from a met coal seam, as opposed to our New South Wales Gunnedah Basin-based products. So they price differentially, and they are stickier in the market when things move around. Does that help?
Yep. Yep, yep. Absolutely does. Just one follow-up there very quickly. In terms of the Queensland operations, you put it quite well. I just wanted to perhaps check if you're able to give us any sort of understanding in terms of I know you can't provide 100% visibility, but the products' pricing, I mean, are some of these products or what proportion of these products out of the Queensland mines getting priced off the, I guess, the premium low vol index and what's being priced off, I guess, the lower quality indices would be an interesting point to learn if you can shed a bit of light on that.
Yeah. Thanks, Rahul. Yeah, look, we won't be giving splits on the four different price because we think that's just a difficult thing for everybody to be able to manage.
But what we'll say is, and we said this when we actually purchased the mines, and we'll repeat it again, our drive is actually to get the majority of the products actually priced off a relative PLV basis. And that is our objective. And that will take some time. We've made good steps with that already with some of our customers, but not all. We've still got people pricing off the low- vol hard coke. And our realizations on that front are actually doing better by virtue of the fact that those specs are better than what previously had been published. The PCI out of Daunia prices off the PCI, so it won't be a PLV hard coke that we're able to move that one to. But we are trying to simplify this for you.
So with each quarter, we will continue to give you an average realization for those four products off the PLV, just so that everybody in time can feel more comfortable about, in aggregate, where do those four products sit? Now, they move quarter to quarter, as we've said before. And they move month to month. If you've got a hard coking coal shipment out of Daunia slipping from one month to the next, and it happens to be at the quarter end, you get a variation. But that's not the way we manage the business in terms of a month-to-month basis. So we are trying to help you in giving you a landing on an aggregate realization across those four products, say, for instance, over a year, rather than delving into the minutiae of four different products per quarter. I think that would just be too difficult to manage.
We give that to you historically anyway, but it would be very difficult for you to manage prospectively in your model. So we think that the aggregate of the four is the better way to go.
Got it. Okay, now that's clear. Look, just if I can sneak one more in, you talked about how the first half tends to be lighter on the payout. Obviously, your policy currently is 20% to 50%. You've done about 44% in the first half if we include that dividend as a capital return. So obviously, it's above at least the past couple of years. Is that directionally where we're going in terms of payouts and capital returns to shareholders with this relook at the policy that's coming up?
Yeah, the payout ratio is obviously in our current form based on the thermal business.
And so what we're saying is, when we get to the end of the year, we'll be able to reset the parameters that we're using. And because we've de-risked the balance sheet with the formation of the JV, which I have to say, the team's done a tremendous job on executing well to make sure the regulatory hurdles that we don't control have been actually cleared in a timely fashion. So done a great job there. Yeah, the board will be able to reset those parameters for everybody at the year-end. But suffice to say, the levels we've pictured at already, I think we understand that there are expectations that go with doing that. And so we're mindful of that when we settle on new parameters at year-end.
Got it. Okay. That's all for me. Thank you, Paul. Thanks, Kevin.
Thank you. Your next question comes from Paul Young with Goldman Sachs. Please go ahead.
Good morning, Paul and Kevin. Kevin, great to see a countercyclical buyback. Just wanted to dig into that a little bit. I know last time we did a buyback, I think back in 2022, 2023, the rationale was that the fact that your free cash flow per share was really attractive. So I just want to understand how you measure the buyback. Are you trading at a decent discount to NAV? Is it purely a valuation call?
Yeah , you had AUD 5.20. It wasn't a tough call. But what have we got? AUD 1.7 billion coming from two partners. It's AAA rated on the March 31st. So call it AUD 1.5. That's AUD 2 a share. So the rest of the business is worth AUD 3, is it? So this wasn't a hard call.
You do the math, and this thing we've got a view that says that the market looking forward is robust and strong. We've got a really strong platform here. We've got an unlevered business, pretty much unlevered business. If you didn't put the buyback on, I think if Paul went offshore, they'd be almost flogging him in the meetings offshore, so I think the board took a view that said three times EBITDA looks a bit light.
I think the framework, we've stuck to it through the time, and that's working, and I think it's the right way to think about how do we deploy the incremental dollar of capital that's available to be allocated, and I think that's served us well. I'm glad you've described it as the countercyclical buyback because I don't want to be involved in a cyclical one.
Yeah. I mean, it's a great decision, guys. No pushback from me. So I guess the question then is, investing in your own portfolio or buying back your stock? And I know that Queensland Assets, you only spent AUD 100 million in the half, and they're probably well capitalized. So now, is this what you just continue to do? Just keep on buying back stock and don't invest in organic growth? That's the right decision at current share price?
Well, I think this is dynamic, as you know, Paul, right? I mean, these levers, they're important levers that you must have available to you at all times. Now, the variables in terms of how you assess them change. Now, as Kevin's rightly pointed out, the share price makes the case for this very compelling. And the board will reset the payout ratios, as I said, at December, sorry, in August when we release our full-year results.
So that'll be the right time to more formally reset that based on the fact that we've got a bigger, more robust business that's generating good cash. And so we see all these things being important to us. But as you know, not all those different considerations in our framework are executable at the same point in the same time, whether it be internal growth, whether it be investing more capital in existing businesses, Vickery, whether it be M&A. All these things happen in different timeframes. And the ones that we control, obviously, in terms of capital deployment internally in the business and capital returns to shareholders, those ones we've looked critically at this time. And we said this is the right time to do it because the share price is where it is, and we're very confident about the future of our business.
Yep. Understood. Paul, can I ask just about the thermal market? It's really cracked, right, in the last sort of four weeks. China was stockpiling a lot towards the end of last year and importing a lot. Their domestic mines have been performing well. It looks like the market is well supplied. And obviously, you've got the impacts and the relation with the gas price as well. But it should have been a little bit more seasonally stronger. And now we're heading into sort of shoulder season in six weeks' time or so. So any thoughts or any views on the thermal price and what's really driving it down?
Yeah. Yeah, that's a good summary, Paul. Yeah, good summary. Look, I think consumption of the coal is actually pretty good. We've got a cold winter, which is nice around the place.
So that will deal with some of that. I think the one thing that just to add to your mix of factors there is that in the high-CV market, there has been a little bit of extra production turn up. And Australia might even be the culprit for that. So there has been a bit more. But the consumption is actually good. So our key markets are doing well in terms of consuming and purchasing. So we're not seeing any change in behavior on the contractor positions we have because, as you know, we're pretty well contracted on our thermal side of business in particular. There's been no change to that. Nobody nominating for less tons. That's all been fine. So I think this will wash its way through. And I think what we're seeing at the moment will wash its way through.
And that's why we feel that it's just a good opportunity. We're comfortable with the business going forward, that our customers are in a good position and premiums are holding up. And you'll see this adjust in time.
Yeah. Okay. Great. Thank you, gents. Appreciate it.
Thank you. Your next question comes from Rob Stein with Macquarie. Please go ahead.
Hi, Paul and team. Thank you very much for providing the update. Just on the buyback versus M&A consideration, yeah, completely understand the points made around the value of your own stock and how you view that. I guess the point would equally lie to potential M&A targets at this point in the cycle. How do you think about M&A in that context, given that there's a few assets changing hands and that gives you an opportunity that you might not get at other points in the cycle?
Yeah. Thanks for that, Rob. Look, well, it's probably useful just to be clear on that. There's nothing that we're excited by in that dynamic at all. So I can allay any concerns that Whitehaven's interested in doing anything particular at the moment. We're very satisfied with the M&A that we've done. There's lots of work to do to continue to improve those assets. We know there's plenty of upside there. We're doing the necessary work to try and make sure we can liberate that value as quickly as possible. And so it was a pretty easy discussion from our perspective in terms of how to allocate that incremental dollar. As you say, there's a few assets floating around, but they're not ones which we would say are going to add value to our business.
We're just focusing on maximizing the benefit of the strategic M&A that we executed nine months ago.
Really, the case going forward from a capital allocation point of view is a deleveraging play, increasing yield, and we can see that yield come back via a buyback/dividend depending on the relative price of the day, i.e., the buyback sort of underpins the valuation, and then we can sort of expect it to be a yield stock in that regard. Is that fair?
Not that there's anything wrong with that, by the way. Not that there's anything wrong with that, but I would say that that sort of simplifies the nuances of that discussion at a board level, I would have to say, because coal prices change, share prices change with it. Opportunities within the business to drive improvements also have capital, more strings attached to them.
And so in terms of how we allocate capital within the business, within the business, I'm saying, rather than externally, is important as well. We have aspirations to do more. There's no doubt, not just with the Queensland assets, which are great. We also have Vickery up our sleeve. There'll be a time when that gets looked at as well. But from our perspective, in the meantime, we want to balance all those requirements that you just summarized and make sure that shareholders are actually getting a good result out of all this. We've got some 30,000 shareholders. They've all got different views, and we're trying to thread the needle to make sure that we keep them engaged and rewarded for their support.
Thank you. That's really insightful. Appreciate it.
Thank you. Your next question comes from Lyndon Fagan with JP Morgan. Please go ahead.
Good morning, everyone. Just on the cost guidance, obviously, a great result coming in below the end of the bottom end of the range. What's stopping you from changing the range or at least taking the top end down?
Well, I think now that you've seen where we are, you can pretty much dismiss the top end, I would have thought. So whether we do it or not, you can see where it is. In terms of the bottom, that's a fair call, I think, Lyndon. I think the challenge there is really we've obviously gone through some weather. There may be some more. Even though we think we're heading in the right direction and there's further cost-out momentum in the business, I think we're steering you in the right direction with what we published in the first half. But we have had some weather since these numbers have been closed.
And so I think it's prudent just to leave it where it is. Okay. Great. Great. And then similarly with the CapEx, obviously, coming in at the bottom end, can you speak to what's driving that and whether there's potential to actually save some money this year? Yeah. I mean, our CapEx generally would come in a little conservatively on our CapEx year-on-year. I think that pattern of behavior is probably understood. And of course, but there always is a little bit more CapEx in the second half than there is in the first half if you look at our numbers historically. So we've nodded our cap at least to the fact that given that our biggest site, Blackwater, we will hive off 30% of it for the last quarter. There is a CapEx impact, which will no longer be in our numbers for that. So that's small, though.
That's why we haven't really played around with the numbers too much in our guidance. We've left them where they are, but we just acknowledge that that will occur. But we're always trying to make sure that we're responsible with the capital. And again, coming back to the beginning of the year, we set this up in a way which is relatively conservative based on the newness of these two new sites to our business. And so we've left it just where it is, acknowledging that continues to be conservative.
Right. And just a quick one for Kevin. Just the net finance costs and the underlying adjustments. Going forward, should we just basically assume that the actual interest bill is what comes into the underlying P&L and essentially all the other items will be stripped out?
You should assume that because what we've got is we've got US dollar debt that's going to bounce around with the exchange rate, Lyndon. And we just don't see that as being useful coming into underlying NPAT. What you want to understand is how is the business really performing, not how are exchange rates bouncing around a debt that's due in 2029. So yes, you should assume that.
Yeah. And those bigger ticket items or those variables in terms of the unwind of the discounts on the deferred of contingents, they have a very short life. So that will disappear over the three years. And we're almost at the end of the first year of that. So there's only two more left to go at that. So those components will disappear in two years.
Well, they'll shrink in years. They'll be smaller in year two and smaller in year three than year two, and they'll disappear at the end of year three. Yeah. So that's the reason why they're stripped out, Lyndon.
Thank you. Your next question comes from Paul McTaggart with Citigroup. Please go ahead.
Morning, all. So Paul, I just want to, I mean, you may have seen Japan's Seventh Strategic Energy Plan, which came out mid-December. And so in prior years, it's really emphasized reduced dependence on nuclear power as much as possible. There's quite a shift. And now they're basically saying, I guess, to meet green targets, they want to get nuclear back up and running at full capacity or near enough. And they want to obviously increase renewables.
So it takes them. Their target is to go from a thermal energy mix, coal, from roughly 70% in 2023 to 40% in FY 2030, which is not that far away. And I know they're half-year offtake, right, for customer base. So I just want to get a sense of, is this just a pipe dream, or do you think this is a fundamental shift? And are we going to start to see your key thermal offtaker start to take less coal through time?
That's a good question, Paul. But again, that's another one that requires much more time than what we've got here. But just a couple of points. I don't find favor with the notion that they've been de-emphasizing nuclear in their previous six plans. I don't see that at all. In fact, of each of those plans, they've set aspirations for nuclear which haven't been met.
And so I wouldn't agree with that part of it. And I have seen the seventh plan draft as it is. And you've done well to read it, given it's only in Japanese now. So someone's translated it for you. We've had the. Yes. Someone just translated it. Yeah. We have the benefit of our Tokyo office sorting that out for us, which is good. So we have seen it. Obviously, the seventh plan is quite interestingly drafted because there is more flexible language in that document than what we've seen in the past, in fact. And there's a focus on a longer-dated profile than the more immediate hurdles, which I think they're tacitly acknowledging are not realistic. That would be my interpretation of what's going on there, of course. And of course, being less specific in this plan about which fuel does what. And so it's interesting, more nukes.
I think that's always been the case, that they wanted more nukes on. We agree with that. I think that's very good for them as a country, given all the infrastructure that's already built and been sitting idle largely since Fukushima, other than maybe 11 units. So that's very positive for them. The alternative, obviously, is gas, which is still more than twice the price of the equivalent coal price. And so the notion of doing more gas, I think, is a very challenging one for them, given that they already are very, very dependent on it. And still quite a bit of fuel oil in that market as well, which is less than ideal. So we don't feel like there's a thermal runoff of any great concern here at all. I think, as everybody's seen, you may have noticed that energy consumption actually in Japan has gone up.
That's been a big change from where they've been in the past with a declining population. What they're citing, that is, that just sort of it's as everybody's saying the same thing. It's sort of data-driven consumption is arresting, if you like, the decline in energy consumption, electricity consumption in particular, in their market. Now that these, I don't know if everyone's seen the quotes that ChatGPT search is 10 times more power-consuming than a normal Google search. That is seen to play out in their market just as much as it is playing out in anyone else's. My sense of that and the discussions that we have with the government is that the existing power stations, coal-fired power stations, are actually going to have to stay on for a lot longer than what people are thinking.
That's just my personal view, but that's what I take away from the discussions with the Japanese government officials that we meet with. So we feel pretty good about that. And coupled with the fact that they're asking when we're going to bring on Vickery, tells me that they need more coal, particularly of that quality.
Thanks, Paul.
Thank you. Your next question comes from Jonathan Sharp with CLSA. Please go ahead.
Yeah. Hi, Paul, Kevin, Lyndon, and Ian. Just first question on the AUD 100 million cost-out target. Where are you seeing the biggest efficiencies there? Is there just a lot of little things, like improving lightning procedures, improving uptime? Or are there any low-hanging fruits and big things that you're quite excited about that you may not be able to implement for a little bit?
He has been desperately waiting for a question to answer here. So given that that sits under his operational kind of things, I'll give him to quickly summarize for you, acknowledging the shortness of time we've got remaining on the call. Yeah. Look, I mean, the short answer is there's no silver bullet there. There's got to be at least 50 initiatives. I mean, we have a program in place. As you can imagine, there's a pipeline from everything, from ideas to things that are in play and some that are already executed. And some of them are the low-hanging fruit that you might talk about, easy wins, and some take of higher value. But obviously, the people issue, we've talked about the maintenance side of it. I mean, one of the ones that Kevin didn't throw in is explosives, for example.
We are really putting a lot of effort into sites as to the design and ensuring we've got the right power factors, etc. So it's a very broad remit across all aspects. And the productivity aspects and all the rest of it fall into there. We track it. We've got fortnightly meetings. It's all being reported up. And we continue to keep the foot on the throat of everybody to keep adding things into the pipeline.
Okay. Thanks for that. And just my second question. I found it quite interesting, just the comment about the potential pre-drainage at Blackwater and Daunia. Can you just expand on that? What is the composition, the gas composition, the content of the seam, and what is the potential plan there?
Thanks. Jonathan, not sure of what you're referring to there. No. That one you've where has that come from? Maybe we're going to take that one offline. I'm not sure where you're getting that from.
Something in the presentation that—
Pre-drainage?
We will take that one offline.
Okay. Yeah. We're happy to take it offline.
We're going to be taking pre-drainage at Blackwater and Daunia. I'll take it offline. Thanks.
Thank you.
Thank you. Your next question comes from Chen Jiang with Bank of America. Please go ahead.
Good morning, Paul and Kevin. Congratulations on a strong result. Two questions from me, please. So firstly, on your proceeds, the 30% sale of Blackwater, $1 billion. I guess after you pay BHP $ 500 million on April 2nd, you will have the remaining $500 million left, which is exactly what you need to pay BHP for the second year of the deferred payment. So, I guess, is that fair to say the proceeds will just be used for the deferred payment in total of AUD 1 billion in the next 40 months? Thank you.
Yeah. Chen, good question. I'd say that cash is fungible. But I would also say to you that we did the sell down on the basis that we had two very good joint venture partners coming in in the form of JFE and Nippon Steel. The billion dollars turned out to be the billion dollars after tax, roughly speaking, turns out to be the two first payments. Or we see that as just means of strengthening the balance sheet in Whitehaven Coal for the next two years. What that transaction does and what that money does is really just support the balance sheet and make it bulletproof for a couple of years.
So I wouldn't be trying to suggest that that money is available for distribution. I would be saying that it would fall into the pot of the cash flow coming out of the business, and then we would look at what cash flows are coming out of the business in future when we look at capital allocation.
So yeah. Sure. Sure. Thanks for that, Kevin. Well, and then another question, Kevin, just a follow-up on the line net finance cost. So the first half, FY 25, AUD 151 million. If I annualize that number, which gave me AUD 300 million, right? But that's AUD 190 million below your indicative guidance of AUD 490 million. So how can I think of your net finance cost in the second half? Will that be making up the remaining of that guidance? So which means your net finance cost will be much higher than the first half for the second half. Thank you.
No. I think you've got the underlying and the underlying and the unwinds of discounts confused in there, Chen. The way to think about this is that the senior debt should cost me about AUD 200 million a year. The balance between the AUD 150 and the AUD 101 today is unwinds on our rehabilitation provisions and some upfronts that we amortize and some leasing expenses. But my take on life is that you should take the AUD 200 as being a gross cost on the facility, and then you should have probably double the AUD 50 that goes on there. And then that should get you to about AUD 300 million in interest cost. And the rest of that will be unwinds from things that will come through, not in the underlying.
Okay. Okay. I guess that's not only for FY 2025. That will apply in the next year.
As we said, in 2026, it'll be a lesser number because the unwind on the deferred payments to BMA will be smaller because we'll have repaid a part of that. And then in 2028, I think it's, sorry, in 2027, it's pretty much minimal because you're down to the AUD 100 million that's left at that point and a couple of other things, so. You've got one year of discounting left. You've only got one year of discounting left. So I'd be happy to give you a masterclass in how that gets accounted for after this event. Were you interested? But don't knock me over in a rush.
Yeah. Yeah. Thank you. I appreciate that. And maybe last question, if I can squeeze in about your share buyback or follow-up, because I guess the market didn't expect you to have a share buyback announced today. By looking at the - if I divide that by the number of shares, it implies around AUD 0.086 per share, which is similar to your dividends. So it looks like your capital return is kind of splitting almost evenly between your dividends and share buyback. I'm just wondering what's the thinking behind that when the board made that decision, and how should we think forward? I know you will have - you will announce capital allocation in August again, just trying to think ahead before August.
Let me try and answer that one for you. So the board came out with a AUD 0.09 dividend, and then - or the board discussion was around a AUD 0.09 dividend.
And the register has about a little over 30,000 shareholders, which is split offshore and onshore roughly about the same. Offshore guys like a buyback generally a little bit more than the onshore guys. So if you've got a AUD 0.09 dividend, we simply match the AUD 0.09 dividend. And that's about the story.
Okay. So it's about the number of shareholders onshore and offshore and the franked dividend. The franked dividend.
You may recall, Chen, the split before being about 60/40 in terms of how we've allocated that in the past. So this is a slight refinement to that. But I think, as Kevin's saying, it's a nod to the offshore component of our register relative to the onshore. And it's modest. But as I say, the full capital allocation framework parameters will be revised and published as part of the full year results.
Sure. Sure. Thank you so much, Paul and Kevin. I'll pass it down, and again, congrats. Thank you.
Thank you. Your next question comes from Glyn Lawcock with Barrenjoey. Please go ahead.
Morning, gents. Lucky last, hopefully, for you guys. Kevin, just a question on the lease payments that are coming through now. They've stepped up, obviously, with the integration of the BMA assets you bought. What does that look like going forward from AUD 76.5 million? Because, I mean, if I double that alone, if I do my math right, it's about AUD 6 a ton of additional costs. And I assume that's excluded from your cost guidance and any CapEx guidance as well. Thanks.
Yeah, Glyn, good question. I'd say to you that when we brought on the excavators in Queensland and we brought on the trucks, we've leased those.
And so what we're expecting to see is this business generate improved returns in years to come that should actually see that being self-funding. So it depends on how you think costs are going to work in the future. And traditionally, that's how we've run the load and haul fleet through our business. So I would expect you to deal with the way you've described it.
Okay. So I should think about it. Bottom of the year guidance is AUD 140. I've got your capital guidance, and then I add another AUD6 a ton of cash outflows. And I assume those lease liabilities will run for as long as the life of mines run in Queensland. Debt reduction.
But all that happens is that's reducing your net debt. So it's actually neutral on your valuation. So move on. That's how I think about it, at least. Okay.
I'm quite sure I understand it's cash flow out the door of AUD 75.5 million. But yeah, maybe I'll take it offline as well. And just quickly, Paul, just the met coal markets. I mean, they too are suffering. India doesn't feel like it's come back. There's met coal sloshing in from Russia at discounted prices. And if Trump does what he says he'll do and gets rid of the Russia-Ukraine conflict and ends it, we could potentially see more Russian thermal, more Russian met in the market. How does that all play out in your mind?
Yeah. Yeah. Look, it's definitely uncertain times, which is actually pleasing to see the prices holding up the way they have, in fact. So I think that's pretty robust given that uncertainty.
The challenging part of it, what you just described there, is actually the fact that the Russians obviously don't sell the premium-grade coals in the hard coking space. So that's not going to really change that dynamic at all too much. But the Russians obviously have been moving lots of lower-ranked met coal in, causing a big spread between PLV and, say, semi-soft and PCI, because that's where they play at the semi-soft and PCI market. So if there was to be some normalization, hopefully stop fighting, that would be great. Then that actually might be useful in terms of normalizing the spreads because they don't have to offer their product into the market at big discounts to get around sanctions and so on. Back to the broader concept of the steel market itself. Yeah, you've got lots of production, no doubt about that, coming out of China.
And India is taking advantage of that. So that was an easy way for them to actually do that rather than buy other input costs when they can take advantage of that steel. And then you did see the Chinese make an announcement just on importing coke into the country, which constrained that, which I think is useful for us generally. But India has been just taking advantage of that surplus steel. So I think that's definitely moderated things in the short term. But we do see them directionally being very constructive for the balance of supply and demand in the market. So we're seeing lots of opportunity to sell the coal into India in particular. And I note that the two premium products out of the two sites, the hard coke out of Daunia and the semi-hard out of Blackwater, are both of great interest to them. So we do see us growing our footprint there in that market. All right.
That's great. Appreciate the color. Thanks very much.
Thank you. Your next question comes from Daniel Roden with Jefferies. Please go ahead.
Okay, Paul, Kevin. Yeah, sorry, last one. Hopefully, the last one for me. I'll make it really quick, I think. So just on the coal markets, Paul, back in January, he talked on, I guess, the price realizations going into Q3. I just wondered if you could provide a little bit of an update after a bit of a soft Q2. How are the price realizations going for the coal mix? On the thermal market, was that Daniel, you say? It was just the, sorry, the coal realizations in Q3 to date. Coal price realizations.
Well, we haven't put out any data on Q3. So I think that what I mentioned there before was that on the thermal side in particular, we're heavily contracted on the thermal side of things. So our contracts and prices with premiums are contracted for the majority of our coal. As I mentioned, if you wanted to sell uncontracted high CV coal into the market at the moment, the best you could get probably is GC flat outcome. That's what we're seeing. So that's our business generally through realizations over time. We said that in a flat market, then we will see GC NEWC, perhaps a little better on average across our portfolio now that the Werris Creek quality has been removed and our Vickery tons are starting to come on. So that momentum should continue.
But as I said before, prices being what they are, but we're not seeing any change in behavior on the physical side of things. Our customers are honoring all their contracts and doing all the right things in that regard. So I think we're well positioned.
Okay. Awesome. Thank you. And maybe one for Kevin and just a bit of a clarification on the unit cost of 137 in first half. I just want to understand if that includes build and unwinds of inventory costs. And if so, I guess the implication there being in the March quarter and second half FY 25, if we see a drawdown in inventory, is that going to have, I guess, the inverse effect on those unit costs?
Look, the way we do accounting for that is that inventory, we pick up a cost of goods sold, which includes the movement inventory. If we build stocks, they come out at the average cost in that period. They go back in at the average cost in that period. The movement in inventory really just impacts the working capital coming through the cash flow, not necessarily the P&L. The 137 is a full P&L cost for that period. Now, it includes, and you can see it on the back slides there. Dan, you can see the back slide in that pack that tells you what the mining costs were, what the selling and distribution costs were, what the admin was, etc. But I wouldn't be. I would only be thinking about inventory in terms of working capital and actual cash flow generation. That's where it comes in to come in.
But again, there's a level of stock we hold, generally speaking, and that really isn't a big mover in the numbers unless we've got some slippage from one quarter to another.
Yep. Perfect. Thanks, Paul. Thanks, Kevin. Appreciate your time.
Thank you. We've run out of time there. That concludes our question and answer session. I'll now hand back to Mr. Flynn for closing remarks.
Yep. Thanks very much, everyone. I know everyone's got a busy day. Sorry for that going on. But the interest in the results and the company as well, appreciated. Thanks very much. And if there's any further questions, we'll be seeing many of you over the coming days and weeks. Thanks very much.