BTU - Earnings call transcript Q2 2020 | Peabody Energy Corporation

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Operator

Good morning, ladies and gentlemen and welcome to the Peabody Energy Q2 2020 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded today August 5. I would now like to turn the conference over to Julie Gates. Please go ahead, ma’am.

Julie Gates

Thank you. everyone XXXX. Peabody's thanks the call and quarter second morning, for earnings joining for Good today President me Spurbeck. With are CFO, Kellow; Mark and and CEO, Glenn

the along We like the encourage on to consider SEC. our as Within I'd factors to reconciliation public you you'll call referenced filings risk Glenn. as the there, a measures. turn information our over well statement non-GAAP of the release, earnings with now forward-looking to find with

Glenn Kellow

Thanks, good Julie, everyone. and morning,

like I'd dedication products are in foremost, First our continued vital thank many and for their to to employees so times. providing that these essential uncertain to

health As the to everything our do. and always, employees is paramount safety of we

protocols had Specific to We across we mitigate to are are line currently procedures economy. help in CDC a the understanding COVID. global and department which supply continue key robust backdrop with COVID Obviously, significant to guidelines to the against operate impact has and impacts demand and under coal the other operating. health in

today, to the I'd move to have initiatives update turning to we key of to overview over structure. actions into and an taken market on with conditions cover our then current the provide then cost before I'll an So Mark financials. call reposition start like

demand. XX%. and down to Asia production was timing, through the Europe impacted the steel global X%, steel Pacific the of global While has economy excluding continues through and the coal scope steel Idled metallurgical across navigate Year-to-date global capacity scale the down production pandemic, China recovery uncertain. greatly June, remains was

year-to-date. excluding countries, coal down demand been a for result, As met has importing major China

XX on metallurgical of daily China a has uncertain Highlighting record was seen resulted pricing. in the have month. years some importer prolonged this we supply in June. market during in that continued the the even for net And time steel uncertainty with pressure crude seaborne first While production is. steel was how responses

both on to week thermal are fundamentals the natural competition overall through in Furthermore, continues resolved India’s nations electricity down gas and importing generation well. thermal has for million rely in challenging large and year June. imports LNG prior XX activity tons from as the side, coal particular, On economic slower

imports tons imposition import tons year, exports down earlier thermal restrictions responses, impact X this we've have to were through of through May. from down Even down up coal thermal demand. depressed. coal around seen June Indonesia the XX% supply coal exports though begun uncertainty remain process XX Chinese some While China was million U.S. million seaborne thermal year-over-year. imports are and Many

while continue in to done. couple have needs program. underway. we Preliminary coal Through generation decline and X%, for indicates fibro increased made significant prices, the depressed X% July should an down To required demand gas to data the to seen repositioning we've if the total already as coupled we'd In overall have railroads and pursue that generation. we've recently coal the was holds, more up most backdrop provide extremely demand addition, potentially expect uptick pricing in natural for further demand to, yet renewable be improved date, disruptions a weak generation should demand. just In cost has supply cuts this, secular to able And load that gas Natural to be took our Notwithstanding major with still mix. have aggressively the both needed us more progress flex COVID accelerating fell lower. just rising mix U.S. pressuring prices gas and been June, to and and coal XX% share growth natural suppliers revised to generation, respectively. further weak seaborne coal XX% the generation the of guidance wind was of XX% and

since our the backed production auto temporarily an since as operation. XXX adapt level a to we've scale eliminated the number a we and I’ll From workforce go shift additional perspective, our positions lines, schedules, by of a units beginning continue have April. detail. into We bit reduced at dynamic of we've of in some workforce to workforce conditions. XX%, Entitled scaled the back year, adjusted

possible, Over we in head to XX a works, that about to adjust are natural demand count XXX months, furloughed the Underground profiles. well of contractors due combination has XX% attrition. allowing our actions while declined past we benefits and run retain Most mid notably global by June, to and as Mine. employees as taken, furloughed lower When we by

operate a complex. the mines and restructured Moorvale as Coppabella single mining have to We

year when to XX%. notable operations. quickly our performance. improved operations X% And as even per equipment. financial three XX% in traders, comparing volumes. our the about from rapidly to most out surface changes includes production We we've the demonstrated improvements structural result, lower a have these are units, responded quarter And trucks, overcame XXXX and year XX demand. have cost surface In even also benefits, of which moving expect dropped substantially XX improvements declining actual result ton We'd results workforce in our per complex. part forward. efficiencies by These supporting mines popped as second volumes the back compared dozers operated owned to ton increased and with nearly They to prior and to across that's these scaled currently Cost

pillar operations Our and have also Underground responded well to room challenging conditions.

have lower however, been to to as operations, demand. not quickly longwall Our able respond

wall. more the wall with bit costs desire complexities As production geotechnical you down a spin imagine, long is and advance often the in operation fixed difficult given could to the

stop we know have we here. While progress, we cannot significant made

will to the our across platform. operations improve actions, entire We longwall at performance aggressive cost particularly to our continue pursue

Arch joint commercial including held venture options PRB/Colorado arguments processes, the pending joint week. in continue advance and also North next We Closing with venture for be Goonyella. will to several hearing the

need competitive to fuel the have this ruling We benefits While we joint the other demand third of for end the look stronger the of to Challenging bring would by multiple forward underscored stakeholders, grown remain judge’s always cases venture the sources. XXXX. to believed the in transaction the only in conditions quarter. with

which process in continue We round North interest the concluded commercial counterparties. have we also the recently multiple Goonyella to first for of

is underway and providing at round an appropriate update to time. second we forward look The the

first continue continually options process B. Chief turn We the these of the to alternatives, ventilation commercial call determine to zone Mark Financial the now over related against monitored his quarterly and to have status Officer conditions, to of development I’ll incremental the strategic weigh results. to as things re-entry cover in market and of will spend With official that, timing any

Mark Spurbeck

financials. I’ll through walking start Thanks, by Glenn, few items in morning, and a notable today everyone. in good the

prior and to $XXX from significantly and the demand weakness impacted quarter Both million pandemic. and seaborne by ongoing negatively in were depressed lower the volumes were U.S. impacted XX% Second year prices volumes continued by in revenues thermal gas COVID-XX pricing. natural prices. declined pricing

year-over-year In to and addition, the volumes. XXXX closure of lower revenues contributed Kayenta in

at gas of coal include charge. impairment billion North prices Mine, in us charge assumptions, mine timing it continued a our changes change the resulting results long-term in Rochelle to quarter $X.X despite plant led renewable fabulous retirements impairment Second and life in of long-term, a growth our being Antelope Lower natural asset. generation

generation the witnessed are to the While PRB the and QX energy remain best fuel coal is as for Underscoring in particularly margins wind joint by the million reliable Arch, remains our the gas grid that incurred prior our we the the proposed levels. is $XX mix demand We venture. continued long-term believe still share positioned U.S. XX% do during of for as assets of PRB. from to sources, essential venture costs other transaction case Competition to natural serve coal PRB/Colorado below expect with that and year we litigation fierce. quarter, joint

Glenn $XX.X structure, million in taken business to in the charges of a As across mentioned, actions the number quarter. we’ve our restructuring improve cost resulting of

actions million Some in SG&A of those reduction by prior periods expense XX% the since reflects for of level comparable the Year-to-date, are the the lowest in benefits XXXX. $XX from year. SG&A from seen

now Turning segment to results.

cost of $XXX seaborne global and volumes, seaborne demand disrupted in the delivering $XX begin X.X line and per adjusted average operations Shipments half margins. by sales EBITDA exported. our million the totaled weak continue export nearly seaborne cost We as of from just to we levels, of particularly million segment. environment new $XX over well during average The per thermal Coppabella were metallurgical castle segment same significantly the be Let’s XX% COVID with sub Year-to-date, constraints. year sold and benchmark price Shoal leading million ton challenged price Lower to period. extremely per Moorvale contributed higher Creek, with tons short the responded $X with than the have over tons for ton production ton, to the largely pricing prior by thermal. X.X at tons

system net yields the increased continuing payroll costs. progress we slower accounting upgrade Creek. to related impacts mainline also In the at We’ve further realizable addition, net availability. at than lower to experienced adjustments value conveyor coal Shoal impacting anticipated, are Albeit mine on

the the dragline costs. earlier ratios Cost budget, the Coppabella and at which During also time significantly quarter, elevated impacted outage overburdened experienced June Moorvale on in in following improved planned year.

which there primarily the be were as will XXXX. Moorvale’s of first geology, Given in are we we overburden for times of removing half parts

on the the of remainder remain year. coal for We expect to

first in-pit demand. assets to low thermal prices operations primarily began PRB, to margins to the EBITDA continued delivering the meet perspective, we reductions cost extremely EBITDA the rapidly and in of quickly annual shipments compared quarter. earlier the X% we volume tons. regained costs ton XXX improvements the XX% shifted PRB of optimized the adjusted XXXX quarter and year, To responded put XX%. contributed as in reporting declined prior year-to-date, Yet Regardless have $X.XX, earning average gas XX taken quarter quarter. cost customer tons the first the demand, scaled U.S. benefits came lower adjusted of to segment, blending XX% Our the well, $X.XX In impacting PRB while to sales decline demand, compared cost productivity, all in coal down inventory, to per realize of due of to declining headcount natural expense, compared reduce repair we realized maintenance ton, to of margins an lower in increased down benefit set room to million ton. These improved million per continue to per pace and

per the thermal ton challenging reducing cost among at The further and other team leading to volume company operations the well responded streamlined declines despite items. segment as also line conditions, materials, and its on EBITDA adjusted prior remained spending other repairs, margins with services, the year, in XX%, labor industry by U.S.

sheet XX. from Let’s liquidity, $XXX to of reduction balance million a which ended and We $XXX marks turn the flow. million $XXX the March cash now quarter with and million cash of

million $XX $XX interest of investing million additional $XX $XX an quarter, about $XX of expenditures. was activities, including for cash activities, for net capital the operating used used million of million for including and million spend. During ARO cash was payments An

In line options. Year-to-date, terms designated In the securitization mine adjusted debt usage addition total needs, related of exchange as among the we’ve including To long-term obligations. undertaking in additional with to process operational with collateral for for flexibility, seaborne receivable EBITDA. cash a thermal of credit unrestricted financing agreement. are a our strategic posted financial various facility accounted declined, entities for subsidiaries senior certain to enhance segment other negotiated this, our we Wilpinjong we accounts Wilpinjong under legal has accordance XX% the our and debt evaluate and availability alternatives, for and notes

answering Given and refrain we comment further from topic ongoing, is process will today. questions withhold on this this

relative SG&A to of markets, global in Cash focused estimated an We known by of the ARO $XX a further suspension capital and with also like million we as sales, here year there manner, while has increase We’ve by land with factors, discuss. periods the in $XXX few operational be across Shifting natural something first second spend full key, year uncertainty million of based deferred quarter, cut dependent we today, on to ultimately XXXX last remains requirements. on conditions, $XXX to and preservation year. upon volumes committed the compliance a in Peabody gas economic future to sales restoring and factors in continued $XX reduced guidance. $XX are timely to cash other we volumes half prices the outstanding to are we reclamation million and were of continuing the an are general regulatory expenditures half in Consistent sequencing. weather, I’d and the XXXX to the Given expect full business. the another sit contracted track million. PRB year record million full remains

largely Other shipments million We of in U.S. be thermal tons. expected first committed versus have half the for half XX shipments XX are million year. second to delivery first the line tons half of with

for year. have export the also already remainder thermal the sales priced We tons of seaborne of million X.X

volumes reminder, on sell we export spot basis. also a As a

Moving flows. further now for take questions. forward, business, pricing of the cash improvements counter and the like we over the we to focused impacts company demand our it’s turn Across the believe on call to actions necessary Operator? to to and position the driving strengthen are future. for I’d better lower

Operator

Mark Instructions] ask Levin you from Company, your Thank [Operator please question. Mr. sir. Benchmark

Mark Levin

to much. to of A some the to stay back very the it, but guidance. of questions, volumes you net Because about in thoughts couple year, Thanks quick comment. think cost coal I guys I’m trying you’re on suspended away know half Okay. how from maybe able and extent have the to

Julie Gates

this Yes. Julie. Mark, is

been be what to bit more. off has So of a there. And coal through right. demand we’ve a June We’ve is, largely seen Steel year-to-date what factor China. down going guidance demand was XX% recently right? excluding obviously, met fall production, here quite you’re suspended It’s

pretty So that’s a drastic move.

work customers work to we’ll point. big at a continue continuing pretty with to this unknown with our and just to it’s their But We’re demands. really meet them

Glenn Kellow

longwalls focus mentioned demand fixed our in the those mines operations, of we’ve said, been And three as the particularly focused reduced I with longwalls mid-assets. on the with are And I’d on remarks, associated levels. costs two

of to ongoing our a that focus So be continues program.

Mark Levin

doesn’t to past that would it, got in in potential It in getting know this absolutely. there at that million the look half sounds happen if of was the some costs a I’m curious, below like one-time. there��s guys might get you quarter just but number. kind $XX second the that to like be $XXX lot the back year, going of Yes, on year. cost had the I talked It a point about

Glenn Kellow

that at to be I would operating in is that normal level. time, dependent that to see, upon would the And to going talking the said, capacity year. either want capitalism. second customers, target or their as certainly, Julie situation – we’d the of rights. assume working our with Well, But our we be that’s What end half

not we’re at that predict this really So able point. to

Operator

go from question. FBR, Mr. with your Lucas B. Pipes Riley ahead please

Lucas Pipes

inbounds customer Difficult] I you. going [Technical of on for to indicated executed for the morning. Thank what recorded Are increase over of [Technical to still Good your wanted already seeing to economies especially is that starting comments interests refer, that? kind you kind Difficult]

Glenn Kellow

the question. Because it half. hearing second Yes, little question? here, nature the but you’re other I didn’t the about question both general understand think asking, the folks bit you’re the Is optimistic call a sort I talking we of potentially about that customers of building

Lucas Pipes

[Technical Difficult]

Glenn Kellow

Yes.

us we positive. I and think idle markets. much of securing have probably China steel importing clearly general across But target lockdown our occurring is do for a customer capacity

sort the hearing. same it’s conversations you’ll are We to have that. think sorts starting early But too to of I call of

that uncertainty of and met going year. around restrictions going quickly coal unknowns China indicate of a coal. a been clearly, those probably foreseeable in way And why, that range be think to this is bound. would they I’d the for probably in and on there still held metallurgical as targets import the half and out coals or in it’s in conditions also well. lot China it’s But And relaxed into tough be lot I market, the reflected some are in second of how

lot trying of pitch a we’re still So to uncertainties, the pipe. as

Lucas Pipes

accounts then per or on I lower value to I [Technical Difficult] for it wanted principal kind number regards in question of I cost. that, appreciate cost the Okay. anywhere return And that. to the Mark’s hear on see follow-up regarding it lower

Mark Spurbeck

Round ton met the realizable much pretty We $XX across question. a about Yes, adjustments our value $XX it’s probably portfolio. had or to million impact. Lucas, for a numbers, net thanks

Julie Gates

a And it Now that out. non-cash sold, that then being with when essentially. coal I’d said, that reverses it’s be adjustment, just essentially point would is

what it. So an the as our it tough stock it’s based Certainly doubt of have adjustment, pricing performance. did of we’re sizable on off the accounting of about just a in, but given No conditions market impact underscoring it’s end quarter. cost

Operator

your Bank Fields go please Matthew Mr. with of ahead question. America, from

Matthew Fields

but through your XXX the [Technical to What’s the Did that able of year per Difficult] Difficult] plan the for any that accomplished Difficult] [Technical indenture? of you within about read [Technical permitted Difficult] RP wondering how confines in the designation you [Technical exchanges, just were the come

Mark Spurbeck

heard your I Mark. of most it’s Matt, question.

the We’re having But the that what negotiated say some trouble with is, we an Wilpinjong in accordance line. effectively I with designated would is subsidiary unrestricted mine terms.

don’t is discuss disclose the But negotiated and documents. we’ve notes credit individual everything terms baskets. So we agreement, I indenture with done reiterate of the will consistent and that the senior

Matthew Fields

the then And math, additional have about you my should $XXX you you about collateral can By in all right. [indiscernible] you in collateralization. quarter. have this million remarks, to talk had were post expenses additional cash All forced prepared more

Mark Spurbeck

that there about that. million had the we second something posted So of for during was $XX Was collateral quarter. additional

Operator

please. Mr. please moment, One ahead. Fields, go

Matthew Fields

Yes.

do anticipate any the you. Thank going Okay. post then having year? more collateral throughout forward And to you

Mark Spurbeck

routinely negotiations anticipate Early about July. We posted time. in with our in quarter, that providers. here discussions We significant $XX third have a the there and surety was have we at more don’t million present

we right, XXX% collateral right to bond the sureties amount. to have the negotiations request of additional have the those a However, surety up and contractual

Julie Gates

you're generally are of letters in not of but And those aware, the form cash credit, I Matt, collateral think postings.

Operator

from BMO Capital Markets, with please Gagliano Mr. your ahead question. David go

David Gagliano

changes that is just designation I mean the hope a you the Does consideration? under can divesting at potentially also to of that have subsidiaries hear asset regarding question me. the Wilpinjong. I

Mark Spurbeck

subsidiary or or no sale. that implications whether asset for be say the I'll No, would of designation restricted a not has that of unrestricted

We today current plans asset sale. have for that no have to

David Gagliano

headwind that the go equal Was the the quarter that was does in all the in be down should in I mentioned $XX third I and of a second met But the coal away deposit, it terms negative answer in there missed I cash in Okay. cost here. quarter. second $XX Thanks. NII then quarter that? a costs cash just And think else ton

Mark Spurbeck

charge, was, $XX approximately the what – recorded the inventory price the of have it we during valued was that ton that $XX to per question is said to in books that the quarter realizable at now, effectively, per non-cash than less it quarter. impact the the per is costs I adjustments realizable second twice value on inventory we The that market. The impact $XX ton time ton to net per second get the million

Julie Gates

bucks color so That on there. little tons. based just time down a And so for per substantially, which right, a sold we bucks is bit about a a million million ton or were sold, only that

in I'm tons – quarter. doing quarter Now getting in versus million ton thing X the million prior the the

it a quarter. So $XX million demand but basis, impact was roughly, the in we per ton given weak saw that the on outside

Glenn Kellow

in forward year. the to going profile. be we respond that particular, or And changes half reiterate, to also to of it's keep going I longwall of second just demand function operations, continue in in to take ability to to back their going a demand sales the And well

Operator

Vittorioso question. your ahead with Mr. from Matt please go Jefferies,

Matt Vittorioso

Could discuss some clearly, credit post Thanks cash, the issues the and I those for bunch covenant you of you've – Yes. a the is and question. using facility to if your other credit collateral but don’t liabilities. facility you're got any with of know there

on So the covenants are that other coming or facility? other or, pipeline issues any down maintenance that covenants

Mark Spurbeck

we that progress firstly of covenant reiterate start or our all of to we times. probably confirm, as covenants with net the here one the will back is is ratio I'll net half The you're the compliance are referring the that ratio And what to leverage year tight. debt get leverage through documents. just two yes, in Matt, in

it whatever are credit access the and We to revolving facility. maintain compliance do takes to going to

Matt Vittorioso

XXXX, a I just Okay. going extent of spent the than were mean, of I make while question. back And to and buying what knew more to that guess a then would you but I guys about spot. back your lenders not on legitimate look questions equity one conditions what we your didn't this be a no bit like that, bunch be and you're little I'll in think statement And more transparency a asking to how are appreciated maneuvering just going to getting cash. call, need do you're you in given on with tight money this assets

consider So Thanks. that. just maybe

Mark Spurbeck

exchange today, Thanks, remarks, Matt. we as many for but is financing are as mentioned I'll of specific before, just that considering. one my I discuss any plans won't options a – in mentioned we I debt debt

Julie Gates

last tons mean, XXXX to over Matt, I I of think $XXX versus the drastically talking also and has if versus six QX of considerably versus mean, in of I the that we recognize XXXX, important the changed it's landscape $XXX. just QX and of net market within prices – at look about even were months just we year.

sit the today, have decisions And you where think as about has And could when so that. and COVID drastically nobody well. to have if uncertainty those were known obviously, here backdrop we changed then that of add things making we it versus

well. So cost we're bit front taking over We've the multiple areas actions of that the about business. of count. steps Glenn, today months, drastic eliminated as across XX a quite mean, talked taken repositioning past head XX% our we've the on I all program.

throughout do. believe we're doubt but taking No and from we every here, about what So way the doing remains we need to we're tackling can. key Preservation that we it it. business actions

Operator

from here question. your ahead Scott go with Clarksons. Mr. Please

Scott Schier

If costs. net some the of everyone. morning, coal could up good I Hi, on questions follow also about

drive. of you took the all average, this lower plant the more Some of you decided these system the per point situations in elevated than are costs the volume On other or sequencing to of of the system quarter? quarter, the impact impacts behind these some reasons in third kind upgrade for their of at

Glenn Kellow

Yes.

because Moorvale we to call pit Coppabella So time budget. half second of be expect dragline year. the sequencing, the in the done on at was outage on on of At outage scheduled

expect that the the Creek first taking factors. in second of than half year entering of So to But conveyor knew have we we to quarters year. I envisage. going those upgrade is the we're we couple conclude the at little longer Shoal would The a guess, bit

our are really to more of think steps factor entire moved the of to of ability single new and operations, taken to fixed fixed contractors that with schedules ultimately workforce say reduce mine. costs. be metropolitan, one we and out a underground That's my have supply across that if advance particularly But and costs costs at mines volume. We've and respond I I going with last longwell take looked platform.

Scott Schier

That's Okay. helpful. you of of remainder quarters? quarter. appreciate less expense. repeated the staying part to costs, that. more due should I expect that I on then see to then costs and PRB, pretty the this And maintenance Do was kind thermal moving But were the this impressive we cost think level through to year is in the them or require being of but

Glenn Kellow

think part team also singled not on was first the activity I'm that's think we say sold that thermal Well, at It's that And our ongoing has platform cost the really might fabulous I we've the sustainable business, a up. in occurring to impact prices quarter, a to we demand U.S. we that I look, significantly steps are across expense. volumes. but program to a taken when job lower I of really able really would started thermal the entire stepped natural looking has – We what – of to across entire clearly improvement respond maintenance U.S. has is lot out and gas respond. being cost done improvement. our in sure But we

are we've costs are which we plans. got over some – diesel life months, we of ways in that But tailwinds looking low particular not but can sustainable the got at looking not say of only to withstanding some respect surface process. the it's We've that with six for next mine capture fair we operations. to Now

Operator

time. are no at There questions this further

Glenn Kellow

safety. in And for ability quality you. to health unwavering with products thank adapt for global Well, like to heighted for multiple all changes participating adapt. focus we to shown commitment and thank landscape. a the new to to you've business, quickly I'd to the and today's employees call. you dedication the especially the for your reducing all continued you Even I'm thank as grateful all their

call. that please And safe So, stay well. operator, that and today's concludes

Operator

the concludes XXXX for earnings Thank participating. call. QX you This Peabody Energy

Peabody Energy (BTU) 5 Aug 202020 Q2 Earnings call transcript