ARCH - Earnings call transcript Q2 2018

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Operator

Good day, everyone, and welcome to this Arch Coal Incorporated Second Quarter 2018 Earnings Release Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Ms. Logan Bonacorsi, Director of External Affairs. Please go ahead.

Logan Bonacorsi

St. from morning Good you us thank for and today. joining Louis

may remind certain statements to statements we financial to begin, during the that me let performance, and Reform business including Before Private made Securities statements Act. you this expected future considered Litigation be forward-looking our according relating call,

file maybe which you may law. address and more to website statements, in in detail this We whether end our as the annual non-GAAP Forward-looking to of section update press nature are, also at like to morning you results materially different would that described financial posted matters statements required plan to the Investors by our by which we reconciliation result SEC, degrees, not do future measures except expressed information, different are new to of reports our with that actual remind I discuss of have at future than we the find quarterly forward-looking undertake events that statements. release, cause in their of can a or uncertain. we the These uncertainties, be forward-looking the archcoal.com. a our in copy our a that as of otherwise, those

of On Lang, CFO; and and the Eaves, Arch’s and John Drexler, call Paul Policy. Senior this Senior Public Vice President Deck President morning, Arch’s President Vice John CEO; Strategy we have our our and COO; Slone,

take and questions. we We John. with will will be formal begin your happy to brief thereafter, some remarks

John Eaves

the just progress key very I’m turned on ended. strong excellent pleased and Thanks, to quarter Logan, during report in everyone. of and a objectives range Arch good results morning, that

through million persistent that put the chain during our very we stock, are and purchases Perhaps and cash, launching to our excellent cash franchise strength of more program capital markets. robust in benefited total return additional buyback confidence program, a as million. authorizing $XXX well and represents program and of year. view That recently ago. program XX% Moreover, access and an translate into as the of months aggressive last we excellent improving and shares shares to outlook. bringing significantly, increased global strong capital we capitalize the that we creating than nine shares cash believe another generating drain value of achieved authorization by a hoping excellent return on in million the in coking $XX total, potential with ongoing for of the levels quarter million authorization thermal to continued The free program. buyback continuing progress current Our international the value the logistics support good emblematic of use the well management of workforce nearly just that since share We the margins repurchases since as continue $XXX team, business repurchase the XX and Company’s and In more from approximately total X.X assets, of is the to Arch we as million significant creating signaled to of vote of May board strong count and nature those we our of spend enterprise. inception of in share X the generate the

we the cost encountered challenges the strong anticipate in the quarter. few broader margins percentage confidence. coal for results we operating thermal achieved franchise, market. We prices were As such the levels this discussion on in performance of like in the indicated, a at coking I our now higher capitalized operating mines and shipping further for coking quarter prices market over quarter. isolated the We thermal our by shift again before to in Company’s first we other our second seaborne to further coal support and results effectively for than comment would conditions on output take Basin River turning the impressive our the international Paul strong on call coal provide addressed and significant Powder strong in minutes

with retreat coal coking markets, Let’s strong. while fundamental the of the still somewhat start have we recent are in have prices quite beauty weeks,

year-to-date, a Of steel steel course coal demand demand and are regions. driver is across prices Seaborne important to there as steel That price critical and production price well, mills and less bullion historical were evidence strong. continue an steel continue supporting and year-to-date June be encouraging. continues be further provide seaborne at always the of news remains Chinese quite all both currently strong marketplace. global X% to markets purchases a the will XX% made be imports down coking coal prevailing Chinese to are up on coal coking buyers coking basis Global levels

seaborne U.S. seeing all assessment demand not growth to centers. million started reflect have rapid strong India tones the Coast continued We to we increased In with are too the or India premium Steel a East XX%, is encouraging coking and pace from across and reflects demand, coking Indian are also and Indian view on fundamentals rapidly strength coking seeing imports coal we good future. coal in sector, which Australian products largest become in share base of that coals, year-to-date on X.X that up maybe of over distant importer are recent hard days,

is the vol low stood in which FOB As excellent Vol be $XX premium premium and over Moreover, vessel of back an High-Vol as highly an Low know at in marketplace product B per over $X A, products. a High-Vol continues net ton, coking you the coals coal a assessments this for provides is our morning, the operations. metric to and which currently margin cost reflecting $XXX primary a high valued

and and keep On in front elsewhere are persistent the we disruptions the and in to healthy balance. challenges on the issues production supply helping both see side, Australia continue those logistics to market

increases today. supply market enter high but the new in have response are the modest recent the we Of seeing been to course volume prices,

part, scarce, well bode previously most term. high seeing cost for market, balance continues pulled continued being we market back should intermediate the the are into which idled capacity and to nears new investment For be

Looking degree metric metric highly attractive believe thermal tighten levels at days XX% now very helping compared through per power which for ton to domestic thermal Arch’s remain things prices to here is June, West were prices summer, and the is at generator. liquidation the day normal at Europe up important fact when Cooling helping a start stockpiles delivery, strong accelerated ton. increased stand the home helped the U.S. per supply, API-X markets, liquidation. seen still be the we have Coal-Mac generator stockpiles nearly the $XX Newcastle U.S. thermal level are we Elk These At are Northern that’s for years. are and but lowest prompt Also the as needed the at and accelerate markets. just to a over that to strong international four for exports stockpile XX overall operations, XXX estimated just in for of present,

liquidation XXXX beyond. positive summary, the natural the second Given about buying the an activity In are during of gas we to and assuming of excellent the and levels feeling we prices, approach the the see expect would increase course if target made remainder few over next are stable quarter the we with quarters. outlook ongoing for progress pleased and we stockpiles in prompt

market very continue coal supported fundamentals Our for returning Paul franchise high I And turn will thoughts further for the to second customary is performance. in place generate creating flow. to and levels the now cash a in way. of capital to its at call coking level, highly forward we Paul. clear going we substantial quarter over a have value plan shareholders executing With that, free on

Paul Lang

Thanks, John, everyone. morning, and good

second performances. we both had As operating John mentioned and during the marketing quarter, strong

during we move costs challenges forward hampered global coal international in both our Operationally, with overcame Metallurgical of On the and still of the first not markets. initiatives was better X.X our in logistics second order taking timing of (Ph) coking the our Basin the markets XXX,XXX as of to result our arrival advantage scheduling, segment, internal tons. cash the our exposure a and [loyal] segment. we quarter, sales River performance thermal the and level to to strong to chain, the a side, The expanding in almost expectations reduce well exceeding favorable that performance shipped robust quarter, vessels. volume with loading shipping continue the on Powder export we tones coking by as Starting day of improved coal Metallurgical

to our variability making As increase participation we the in it shipments in taking greater forecast. the have noted can past, difficult and markets seaborne quarterly the

of index coking coal looking our Moreover, over and ratable. realization quarters with by going the customers. quarter we coking our the continue steel be supported assessed should our Overall, be that pricing two to ton, the next products. international second with anticipate American XX% coal $XXX XX% on averaged coal volumes However, a pricing approximately ahead, to fairly average producers coking shipments North saying strong on for volume

During balance the of were these and to sale go back have XXXX coking roughly the year. the in continue XXX,XXX our reach shipment at our and growing shipped transaction to during quarter, pricing. subject sales we the for XX% XXX,XXX market. were committed tons of year the than into coking time of to left of basis will approximately tons we for guidance, during of half quarter. expect we for sales coal the coal expand sold X.X for of the this the coal Asia About another more committed midpoint volume XXXX. index delivery index price the into second our of million tons new seaborne XX% coking The on and tons Notably, At an

financial completion indicated transition release [loyal] new the On results, minor Arch’s to the the value in and are we to not June, of panel contributor long pump relatively we run. continue as pleased generate to are operating sectors believe early while a performance the since side, in could its with (Ph) that the

reduction and costlier cost the as to the declines of low shipments cost $X performance this from a at reflects improved larger quarter Mount the the much During cash segment first quarter, the XXXX, per of mine ton complex. compared percentage Laurel second

range cash global in ton guidance during ahead, we $XX the will coal cost for our coking Looking strong cost cycle. support enabling structure all markets This to of participate confident to franchise. remain per competitively the a $XX phase in Arch’s of is margins annual

recorded basin despite seeing early business, better Moving levels expected Thunder’s fall seen of lifted train to Basin loading in Black also southern than to sharp shipping we River May and thus the that by season. the late the the increase the decline Volumes part [indiscernible] portion rain during the the of June. ability heavy typically were thermal Powder in impacted

to ongoing decline the average facilitating stockpile. quarter, Additionally, of increased earlier while customer demand summer persistent in arrival the above temperatures and during utility the worked

up shore During near market the volume to and returned the the the to quarter, to domestic XXXX power generators intermediate supplement term requirements, leads.

As ton. tons a coal priced of and Black $XX.XX at XXXX million X.X committed an Thunder to of average result, price about per we delivery around

target Black the levels sale of Given million volume XX for had June. we annual the to Thunder, roughly tons of tons of our less of four midpoint as million end XXXX of

layered for to volumes, X.X about million Additionally, tons million at XXXX around during over has we index million in quarter per tons to XX and including Arch’s ton delivery of these move $XX.XX subject pricing. the XXXX two tons price

or the results, the cost and Thunder compared dropped in full-year. thermal markets. prices. this to was high volume West we $XX.XX effective the the range ton continue level stated cost diesel This into quarter. In we cost cash than with maintenance Elk international more per in Coal-Mac quarter With the sequential products driven robust control segment, had a guidance mainly at offset our cost Looking tightening to ton when Black are in the that by to pull seaborne lower by lower levels, other previously quality segment, segment of operating increase $X.XX this first even per to current cash solid for $XX.XX and for ongoing and $X.XX demand per the a a cost pricing decline

West first with to impacted However, Elk than the of and both XXXX loading shipment optimal levels the X% rail due less compared that Coal-Mac. when segment quarter in performance decline the at

rail May June the and loadings operations. two tons more in quarter for third delay XXX,XXX those looking the resulted fact In than in in into just

will we this far rail X.X we more tons in million in from So performance improved than believe July, has somewhat and segment XXXX. export

for about for price and ton at volume was about During more we balance $XX for Coal-Mac. XXX,XXX of sold delivery this West per tons XXXX quarter, than average XX% of Elk the the

portion Additionally, of provide our pricing continue opportunistically on release, markets a as to for strength future the international thermal we of volume the our morning’s highlighted netbacks attractive in risk to layering this in sales. capitalize to periods in international reduce by thermal

sales continue enhancement thermal taking a maintaining during as while quality our position of to we and to our marketplace Coal-Mac, with believe $XX shipments $XX is view the to logical in seaborne this segments, moving of X% pleased through portion Furthermore, products outlet our expectations and costs with exceeded overall I’m operating We increased period a comfortable essential high due the These costs an marketing full-year remain guidance cash for performance while cash closing, logistical from strategy. with to the second per quarter. XXXX operating In ton. key lower challenges successfully and the and another. large sales

safety focus the continue the to thermal the I will provide global a John Arch’s persistent performances. and all by financial while period, our to encouraged and an on John. intense We the enduring position. be call and like thank coking leading, update strength turn during for would of who work in will environmental We the over markets depth of their coal employees the industry seaborne same to time that, delivering With Drexler, hard at markets.

John Drexler

Thanks morning. Paul and good

During our commitment executing the quarter, program. on demonstrate to our return second capital aggressively to continue we

at program’s purchases $XXX of market of our of shares second returned price shares of XXX,XXX since us inception XX% or the generated five share. This million X over flows price per over spending average a $XX Since $XX.XX buy total open quarters quarter ago. portfolio share. healthy As the XXXX, million in of the that represents have assets Tier back we just average May per John allowed cash an to $XX.XX highest of of an describe, outstanding

quarter Board our the of XXst. XXth initiation record repurchases the will dividend paid September of of August of second of to dividend million million we quarterly the the payment addition, has in the capital business since dividends, of shareholders. have $XX $XXX our to the of of Since in Directors at approved per program. Between the share. allocation common paid next In on That capital close $X.XX on the stockholders we returned recurring dividend dividends share and XXXX, have announcement be

we the continue value for will the cash that, the Having provide long-term. excellent our over expectation uses which remainder evaluate capital best as current view adjusted ahead, Looking return given said and resources cash to the constantly we of year. flows risk of stock and of the our free an strong

XXXX. over upon record to expect We further track build our proven the course of

that $XXX to It access now June million cash borrowing continue our position to on we Turning short-term at to XXth, short-term under expect liquidity of borrowing do investments had balance and nearly our the we an sheet. facilities. capacity have should be noted two have

utilization inventory Our and on account the facility receivables ABL.

had under these our quarter credits reminder, we industry. various we of of of to a Inclusive these facilities, letters primarily unused in supporting issue at As utilize liquidity obligations borrowing capacity necessary $XXX the total million facilities end.

of and is know in cash our $XXX targeted you liquidity $XXX of consistently million between majority vast the have we liquidity. and of As the form

support We strong the our additional provide Going through crucial operate target levels will that comfortable form focus falls $XXX industry We industry in balance a unused million million sheet liquidity of remain balance low of we we below liquidity cycle. end balance cycles intensely continue very forward, at phase experience maintaining range. and the even will and cash recognize market that with the leading and that $XXX that or sheet to ample the the in borrowing benefit on capacity, an the liquidity. with between are each of

and select by sales advantage quarter remainder remarks, we during mentioned the expected to improving SWAT. market into for As thermal pricing take the XXXX of export to of entering an in on continue international his XXXX second fix Paul

transacted have are to As sales the yet, apply hedge physical accounting. we able not not

that of program as As SWATs on tons incurred are have these international on majority through a into physical the will ultimately exploration per pricing to At shipments. with strengthened we they we recorded continue losses result, the $XX positions June SWATs the we unrealized with by of million thermal course offset for until will this in volumes be million will higher quarter, the income XXXX. losses any the pricing ship associated over swaps. statement on XX, the X.X These mark-to-market be that mark-to-market entered

we to of international reminder, tons a million coal XXXX. market X.X ship expect into As thermal in

SG&A Our between the and note, XXXX is release thoughts our additional press in now outlook. reflected on cost expenses guidance be operating A and incentive for includes accruals has our Paul few quarter expect to last from we this provided sales and of to million equity the million increase non-cash from stems midpoint $XX compensation million $X employee our additional million primarily $XX program. expense. $XX at This of items

a tax summary, be zero continue second quarter, for non-cash this met benefit to had reserve to one-time range modest to the well thermal a franchises Arch future. from expect we in with to foreseeable our generate cash of in we small to strong provision cost its reversal low from While benefit environment. and a flows In tax continues position the

actions we call our expect We and through been you. to back you questions. our the that, value and to utilize for turn capital have Operator, I ready quite over that continue firmly committed program will are the to program clear shareholders. take our to we to return to are With generate

Operator

B. And Thank we first Instructions] will our you with [Operator Riley question take Lucas from FBR. Pipes

Lucas Pipes

Good Hey. good on job the and morning everyone quarter.

John Eaves

Good morning, Lucas.

Paul Lang

Morning Lucas.

Lucas Pipes

allocation little five shareholder a back follow-up on have front a obviously to over and capital quarters. tremendous of the return wanted to past capital you bit I amount

opportunities. how you you return to look when inception the XXXX what of And from has kind I make think least. other about Thank that. kind of late capital you. sense from stock $XXX think of million then maybe if is you roughly caused at price flat that I its stated. at wondered But I And

John Eaves

capital markets given Board way focused what and program so comfortable that capital its to kind feel for we about the the to clear have very return to optimistic to Company opportunity we our where its forward, since Directors on been and see have that we management them initiation. profile give is return And are forward. expect this and I committed move And we we think value invest forward. that’s seize excellent low to that and the as quite Lucas, cost team program allocation, of indicated of that where opportunities the moving as shares move in and an

John Drexler

is capital, best we at are at at we almost quarter. as looked the with looked and back the our is talking have this we and how Board us to we John. growth, today always Lucas at something John look option for utilize organic looking really And that’s I’m shares. buy Look, said M&A, have as to to best every

really As you works we for M&A say don’t an from just at heard the we have me in anything have Right us. past, that everything. see looked now, external about

have the shares attractive buying continue road. compelled We organic and decisions got now general we business appropriately, feel pretty Company. But markets, think growth to down the right for environment is to do back decision the but don’t some our make watch appropriate coal this opportunities are near-term, those anything this

Lucas Pipes

put as large makers. those domestic you switch kind perspective coal the contracts if steel port discussion you think met and were of That’s And to half think (Ph) into is second on Have prices costs in helpful, and year U.S. kind estimates. have produced of little market coal are Where secondly, the indication industry. well are and market, as would you that you. appreciate a you you Thank costs well. the the fundamentals a that U.S. I where over coal global cost would about on with a and ton of costs, held started on and the of I marginal industry global say on we marginal equivalent and Obviously met producer head the us lowest the [FOB] where out? met have for really But so, shaking if can here and then my XXXX by U.S. the you the prices bit. thank the would marginal to give

John Eaves

Yes.

cost cash volume, to the up take hard cost part or we I to there. basis moved call FOB of we on mine in I’m that low-end car frankly Lucas, because I number this minus. today little a North curve we North is additional it $XX probably I John. that the vary, and of bit. has the an America, basis me plus the peg Let at the certainly on had it transportation brings the America about looking first have as worked side, a If cost be are mean would think And on quite on on

So between it somewhere could be and $XX. $XX

too, XX can averages. think cost we to XX our [indiscernible]. the of we structure industry you kind effectively well are with that think cost below think we guidance pretty globally when we So at compete And global with our curve

it If could... ongoing you on global you a got if basis

Deck Slone

gap Yes. John the into called marginal of globally $XX production Especially as And is costs balance a the and into average. demand longer back think that’s John a in close from year And market, or $XXX metro costs. $XXX back said, the really the [indiscernible] historically kind think certainly $XXX I Deck of instances. you level average has here the FOB has in market. if production supply the market vessel lot with months site, outlook was encouraging hold as alike into we producer is of that to back about last when for fill XX here. or of prices the a $XXX we time, talking $XXX sort but again are being is, the and said range, that what a so marginal with think and Lucas, seen pretty back pulled land rationalize probably China upon it’s the we have to cost have of U.S. up production the mine, higher years recent been to prices come for FOB we U.S. we the was again Certainly, more to some on to in cost interesting seeing, to look hold metric term frankly, talking you then we been $XXX, have the long when quite $XX John globally, perspective. tons for comeback what And we to think

So, moving into feels rapidly. everywhere is right up and else China it certainly pretty curve in like cost the

all I and think cost curve and So, are also us said healthy that coal suggest shifting to we into environment but seaborne pretty dynamic that John see cost going the and are where our given again cost as market, higher. a do ability for margins being pressured everywhere that

John Eaves

will I from talk domestic And in recently. our what have about Paul let we jump seen and customers

Paul Lang

Lucas Paul. Yes, this is

American I producers. have RFPs two think all the see through domestic this North week expected in - the we steel

with I domestic think little this can that to changed, steel North think American, But position bit from every we point I hasn’t as producers as sense the market and going things be a makes time, at our concern little is view. it to a about much would value where year where starting of takes a us. same out say earlier Frankly, like the bit ideally the the I to of the we it’s interesting think is. logistics it’s

and XXXX the though to we will XX/XX. we producers the take international pivot I where the are went where get goes market we I XX/XX about steel closer move from and with that. us saw in domestic think where And

John Eaves

saw for the most have how will that logistical and from XX/XX to products, And this go day, most prepared to for of where of ship us we allow we to But we of value whatever is You Arch creates choose balance quickly for market going do pivot our have Paul that investors options and are the to portfolio discussions see a most just know cost fortunately pretty like go create the you as the at structure, Company. end value we us said year. the XX/XX value. the creates the can those the to said, I

Lucas Pipes

helpful. it best Got appreciate of it. Very and luck. I

Paul Lang

Lucas. you, Thank

Operator

Levin, question Seaport Global. next take And Mark our we will from

Mark Levin

thanks. Great,

a a in of Arch met appeared in is this level of of XXXX most picture at getting about bigger the which it the more maybe Mountain quarter issues confidence Loral, Loral to seeing little structure was First before After kind back recently? cost terms your a question. Mount talk some of bit coal maybe where going

Paul Lang

Mark, its Yes. Paul.

You know advertising pretty going move been two pretty Mountain panel or or putting three I in last maybe the have face of two tell lead mine Loral I’m underground And long-haul you months, at at to is good. those look much the the couple the with times and months, forecast. last the

So, good time. at, about in we this at are point feel I continue to where

coming in steel. and will a I the the thing recall panel last layer coal of One the to is hit the longer our as structure. going but and if the third Longer-term you XXXX, that’s I backup in lower know we somewhere see think I the up, it’s outlook quarter, think also you know puts quarter said in XXXX us pretty on get that to cost that XXXX, good the in that coal in we

Mark Levin

that XXish once you kind that getting understand are. were can So, where speaking kind generally component impact there back to of as feel have maybe confident that kind of today well of to just to is you is of past? But the a where as price range. XX you back in you I

Paul Lang

a than months three better ago. I feel I Yes. did lot

Mark Levin

good. hear. John. Sounds Yes, to Good

John Eaves

kind of the starting budget our next Mark weeks. listen preliminary are over we couple

thicken at said, XXXX. layer we I and like Paul high as thing have same forward will the a moving think those valley I XXXX. the what coming is costs look a for post But, portfolio into better over certainly on that good assessment months, and us

Mark Levin

that like think maybe puts compared and specific then QX directionally you if the about QX impact my the is more of How EBITDA think when hitting of QX think at QX QX, modeling missed QX and I look QX look few as you also, how how you sort about you Got will QX end will But takes. just will how and mentioned you at look year, at then in compared QX, shortly When QX I various QX an the just least? to and and vessels the coals or layer you from of the EBITDA of perspective will sort think and hit course this look books QX will referenced you QX the you maybe question. it over versus QX. be a will

Paul Lang

And overall talked actually you at Company.

Mark Levin

yes, Company Company. Overall overall exactly,

Paul Lang

And the expecting shifting, - Mountain of out in have - a basically we QX that the good QX running in physical pick typically the few stronger Laurel. and appraiser offsetting half out out of the we are but signs other will need we we there. that segment, seeing power bit are So have we expecting thermal a a well things, to performance we a shipping in And of little back stronger are we will shipping think, the segment, side.

pluses possibly and long too think stronger Leer be know at on going than is minuses, wall You one QX have moves both and and to but Mountain Elk. will I QX, Laurel QX West

a down think QX a in bit I So of it an will QX. upside in then little bit be little

Mark Levin

with That’s got my very then And do has helpful. last the railroad. question I it. No. to

there don’t would expect prices relief Do again? rates move is have QX in So you if backup moved more lag QX prices that the in see some come price rates met And see we is higher. higher that your would and rail head expect if off? relief as or on met see when to met you to a

Paul Lang

obvious the I QX to have tend in quarter and index about think the saw we rail it we rates Yes. was lag one What talked Mark for in pricing.

in to down good pretty $X that brought in we most we rail $X, $XX the see $XX, QX in back of So rates a had with will mark $X, QX. the going in uptick roughly

Mark Levin

Congrats on it. the buyback. a quarter and Appreciate very Great. it. Got good

John Eaves

Thanks Mark.

Paul Lang

Mark. you Thank

Operator

Dudas next We will now from take Michael Vertical question Research. with our

Michael Dudas

Good gentlemen. morning

John Eaves

Michael. morning Good

Paul Lang

Michael morning Good

Michael Dudas

pretty see like you with It B. strong anything make in going consumption the start over seems you steel the term near intermediate are would that, especially comeback Chinese and the But had Asia into U.S. to second to the and in it pickup alleviate see that’s half? difficult you especially and the more companies relative Do some to negotiating came quarter. historically you pretty spreads A wide obviously High-Vol Low-Vol third

Paul Lang

I pointed went all discussions other have seen I one we QX with feel steel the actually where fairly and producers domestic High-Vol said heading out went the Michael. that, think of surprise market, QX. the over is confident prices. we in all up indexes B the you down think It’s the the into Having strength

Given good view and about about have perspective full-year the feel will are because that’s I numbers, where they pretty will we our have to to but take, at. take we

John Drexler

continue Michael, think this well demand supply mean to John, fairly is overall balanced. I and that are I

price, down bit at little seen that’s for bit you But us we know I a Vol-A think very a $XXX quite that. High attractive bit that’s have movements have a I can and and quarter. real anytime morning you you longer, was from this mean in number get little first short above, net-net

coal that good internationally. the time-to-time, Vol-A, the are we the around like still what our or cost in where from that feel with we we position market will we So, that High think to scarcity call that but in is moves premium a structure, move domestically product

Michael Dudas

Is six marketplace. thought months than to Appreciate that. nine performance a And this thermal continued maybe that strong your to more given of the market. you also that that how to with sustainability business, fairly much your would market. is lead tighten ago? How squeeze volumes obviously And export productivity could tight out discussion into can but visibility maybe U.S. up customers market follow-up the my of some people export your there quicker have turning

John Eaves

year international if think up step certainly its thermal and look export mean going a what Michael, that million market. met particularly the kind been of globe, million hasn’t around the the U.S. market we our mean just and that’s market. I forecast or we think been I in you have could see that there thermal. And of as whether a investment tons the in Well, you always in lot are on XX supplier met internal perceived of I this swing thermal and XX changing. a the quite encouraged going the about seeing are I about

in an five go million to you over that’s are XXXX industry and going as back if export So, XXX an tons years pretty we almost strong.

than like Coal-Mac Elk market are and that see of put we its combination million So, Dex X.X we domestically. are tons what we going and prices its West attractive in seeing of more much Paul and to we

think right know coal from are positioned international are it you I you going down gas So, I think as pricing tighten forward. you process like in domestic market that seeing natural are I way three, inventories strong does domestically And up market, a the come standpoint. cost the to XXX we is mean we

Paul Lang

already point great obviously, that stack. are a we it’s seeing Michael And

come the seeing already house We are down possibly. stock

stockpiles the four are been sort would lowest and coming, as range what target have getting we we been in the than into long at July we stockpiles and time a saw of we years. level at are Finally, they lowest it’s in view levels end think of the

through there view a above encouraging is there early to I that’s of as that that big see fairly to you summer And going and current point of but curves the part strength a export continue a a heat And are that this of a the $XX that, story. stays real and substantial healthy XXXX, has so globally. been as market also out, not been cash that think part strength, has you thermal just link so, very thermal it’s balance in look is certainly out, to you

XXXX. So, we expect XXXX, to that continue into

John Eaves

really Michael, XXXX, extremely mean Coal-Mac, I several And West it’s just and at so for the look I well its not work years, you that. prices, the forward for beyond next mean they XXXX, if Elk

Michael Dudas

you. export ashamed [indiscernible] we the west. from terminal get those That’s couldn’t Thank

Operator

your take from Scott question Daniel next MKM Partners. We will with

Daniel Scott

Hey good morning and quarter. great

John Eaves

Good morning Dan.

Paul Lang

Good Dan. morning

Daniel Scott

in was said What half on guess I the the Thanks offer two goes to I ratable. comments quarters back the the next of Mark think year about asking should the question what to kind look that everyone. you closer coking The of the that two next side, the kind guys three the back, schedule to or the long is tied for the guess for of X.X is quarters X.X what ratable And about I rate is upside there that? to is or should wall to run think at we Company moves? is

John Eaves

X.X You I about I right third assessment. Paul? quarter you minus or that’s quarter a know model the X.X want assume think quarter think, their X.X now, fourth roughly and third Dan, is number, think mean, plus I to I fourth we good

Paul Lang

That’s correct.

Daniel Scott

in And Okay. haul long coming up? moves particular Leer for

Paul Lang

chance Leer also long Elk QX. not is in West into into that fall QX, have QX, we could I is fall think a there

Daniel Scott

John lot Okay return organic that think for and still changes sort obviously on your allocation pursued, not a growth an the But you milestones, of shareholders. X, doing option capital then guys have. Any there cash I I peers to ask quarter. thing? and this of a permits there, every is that out Leer timing thoughts lot with being of

John Eaves

you XXX that I the Dan, continues we you very mean control continue process project. in know, ball tons attractive see there. We it’s a permitting to as million push actually can

really We anything for that. we with about, something when and at to as business will continue appropriate market Leer M&A against, environment, the found hadn’t external continue look that’s we any environment, look is. opportunities always the talk Board we earlier, comparable to the mentioned right we I X just But to time benchmark have and

our buyback now, we program time will comfortable share appropriate the but are at So and return we very capital program. a with decision, dividend through right that make

Daniel Scott

at I the this from it appreciate that a M&A. sudden that’s were coal? first if right. decision and right of versus would I the all But decision point the to take conditions How And long think

Paul Lang

long round Just that about three it’s Is wall coal. numbers, the all to four years.

Daniel Scott

quarter. great Sure. Thank Alright much. guys, very you

John Eaves

Thanks.

Paul Lang

you. Thank

Operator

with our question take next Jefferies. will Chris We from LaFemina

Christopher LaFemina

question. question guys, second one thanks about thanks strong bigger I capital question and the on quarter. taking allocation. then for generation your about have my Congratulations Hi cash very

the second a your which into in would easily investors right But the now the I which shares of - the not expensive. incremental into or working I year who of So first outflow of dividends. I what And half you buying getting of in is first in think, is buybacks comes of yield income kind behind brought enviable that large think more capital you earnings the the compelling. to guys certainly, you a question a if point your the And reverse assume some really the sorry, question look to buyers so year. and at outflow to of generation, yield, cash seasonality and around shares, about the first position half marginal of guess X% probably versus evaluations capital to XXXX? that, do cash attract yield working is spend we to to reason the about the into pretty Obviously, the accretive enough guess, allocation. I half capital shares or back worry because have world. its are back second you year. cash going Is are generating I many. big lack about And question, of does in some just can Because of you had and that is the to on the Board you the you have do. liquidity mean, you a X% are can pool and we X% that are have get high stock, what going a really there we million mathematically I $XX capital cash Should And want for your expect the in buying forward. down now.

versus I’m declines. that argue seems returns decision dividends you would think capital buyback like I towards wondering means the it special Thank more overtime you. of And how about So, general. and liquidity [indiscernible] the as board in guys shares dividends that here your in how

John Drexler

course experienced had majority we rising as Hi, talked back that of we about kind we levels. a is remainder first the working into in rising for questions. XXXX. negative of adjustment capital the ultimately working play balance, of we you in the fairly Chris those was year of And the of large as Drexler, the capital, regard half quarter, year. receivable this over inventory the have have so normalize we are I will expectation the will in quarter, our the first first guess correct is that the first John to The jump did

we play So, that cash cetera through as and the forward. shipment receivable, plans, obtain operating will self we et out as schedules, move work the

as allocation how constant forward. for we the and In repurchase capital indicated share going program is have us, John earlier today, to between the as program, executed that regard focus we have since that the indicated share the So sit repurchase Management discussion program hopefully here has that the of Board, the addresses we been that it the clearly initiation question. the

place comfortable continuing feel didn’t back discussion look it’s there and forward. the the as with capital that liquidity appropriate uses value right right noted, at stock put buy will a a so portfolio. are in to you shares, we be our recurring we And a within the Board, move Management us constant is now of sustainable for as the and opportunity as team have that we As we dividend we creating

Operator

Stifel. our will from question We take Vincent Anderson with last

Vincent Anderson

more you it are deliberate compete freight against suppliers be or Thanks. just are opportunistic price not have are coal more to to by the a in Europe risking and negative for Asian a really to is going just sensitive is I wondered this of concern share more low home the in versus where price Is factor the markets you delivered reaction export find strategy, willing to rates sending shift basis there where major or that on that for closer to this most will it of the environment with some there probably in are you place your in Asia? more given this they region. a where you run price the

Paul Lang

shift. guess Vincent, term is I in Asia cleared Paul. longest would Asian a strategic opportunistic We steel also bit and this is within little contract easy you well the answer is I tell that met our producer. and

into entered five have agreement. year We a

a is an this that there steel opportunistic value to but we on Asian the also the mills like, with the will it bit a of right. clearly yes go particularly So, is little phase layer coal

Vincent Anderson

continuing after benefit their a are overcapacity just And some in then of you have go That’s you. huge helpful. a recent reports it’s case little most course. level China bit and The they to higher in of been Thank steel unmet insights. set

However targeted the most specifically BOF production. recent rounds have

prices. the So, you demand you supportive think supply of still on be, what impact insights to obviously any favoring would EAF. steel I if initially But don’t really have know

great. would that there thoughts any had you be if So

John Eaves

Yes.

Let me jump in and pile on. Deck can

of years at certainly seeing million over to XX next fact global is America. the million obviously that about XX big as are in we is that we a EAF some know growing. in piece us I demand which growth a for market China But or the of coal well But India. as also actually we six is South the Europe, You growth look met are biggest as five years, think and South tons seeing in Korea

I as years lot China five and holds next and think comer up an or own, of a in really come of We said we from So is India Six India. opening but their my see that comments. growth kind over the Deck.

Deck Slone

Hi, Deck. this Yes. is

substantial China agree close fully, next the more absolutely tons [BF, we time India you the a (Ph) is now But certainly going it’s more just what we slow avail where years now first of China. XX% additionally (Ph) appreciably. there but of Right seaborne China themselves pretty BOF] change is We said. the know moving course, So them is market. than continue of John surpass see to process. to would with a India to the is, you coking expect right to in just amount [EAF] represents very that’s to And take XX are as for few that that output million of than coal, for China.

the often. going the been before have the we really are in fact, their perspective massive coking at that about a course China demand. steel the Metallurgical the we even quality get doesn’t looking has advantage to industry. increase huge is for you a is is And have are coastal something And in point of pace, that to in mean a to needle logistical move history a if XX% percentage have few perspective China in from never I terms China speak a at change a over got of consumer, seen reached gets reserves of the from of a obviously from we benefit market market phenomenal mining looking that steel so in the some And EAF much or coal provinces seaborne are seaborne approaching if China certainly but

they that quality. on structure, at pressure on certainly pressure so putting are cost And pace their

to think time for are they the market but looking are we Australia that U.S. be also So to going from seaborne coking the available premium of from coal

for opportunities are there said, us Paul there. As

back probably this see market months first this we in back, as has of the from have six to we as significant the continuing for for has player of China mark best So the we even seaborne and China step economics. the months of five seen looking first China out pulled year coal year come or for be see, potentially time-to-time

And watch player and certainly see them as we concerned are significant again, we overly a trend. and so that will

Vincent Anderson

network investing to it’s is sense another to have some to in? I’m and major importance, to grow And Is that that backup that some was I market didn’t capacity. capital I allocation the at lot of explore want something Indian or on And to you would of because that that a and kind of when look you question. hard assets you India exporters continues market the But kind on end you trucking ground, beneficial isn’t similar strategically, this whether market, kind of bulk Thanks. think this a a that distribution glad briefly. in is find commodities

Paul Lang

worked last handle Indian and it’s bit very we months. well. Singapore frankly Vince of asked the a all sales Yes question couple out that’s the we a have ourselves office over Currently quite

and its As potential. we continue to at India growth look

the have I time, some we at have think in point country. to physical in may presence

Vincent Anderson

you. Thank Alright.

John Eaves

Thank you.

Operator

question-and-answer John or remarks. will That additional back session. today’s closing any Mr. Arch’s I turn for to the Eaves, CEO concludes conference

John Eaves

Coal. thank moment to results. quarter, and Company, take you. to a Thank hard everybody in to second execute really forward XXXX We focus look interest feel their results for work want during generated employees, the want about half we you on position to our on good October. plan the our quarter updating way the of third I their Also, second positive I Arch and thank some in to

Operator

presentation. you That your Thank concludes today’s for participation.

disconnect. You may now

Arch Resources (ARCH) 31 Jul 182018 Q2 Earnings call transcript