BTU - Earnings call transcript Q3 2020 | Peabody Energy Corporation

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Operator

Good morning, ladies and gentlemen, and welcome to the Peabody Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode.

Following today’s presentation, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, the 9th of November, 2020. I would now like to turn the conference over to Julie Gates, Vice President of Investor Relations and Corporate Communications. ma’am. ahead, go Please

Julie Gates

thanks XXXX. Peabody’s President With and Glenn and the and call third Kellow; Spurbeck. Mark quarter me CFO, for morning, earnings joining for CEO, Good today are

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

Glenn Kellow

everyone. XXXX other. challenged morning, results been a been Thanks, over any good Julie, progress, several demand quarter has year unlike saw Peabody active despite and reflecting our the certainly has fundamentals. months. the past We

more is underpins our In the portfolio on we’ve addition and specific working a right our our direction to commitment been enhancements, ongoing recent surety achieve step to but still in agreement financial reclamation. to have longstanding several objectives. We

achieved bond mine than In we practices last several the successful years, related have United to in sites acres X final recently, XX,XXX And the States. fact, our Phase at just management more in across over revegetation release XX Quality. but our will on touch with Rochelle Mine Environmental in covering fundamentals. Excellence Reclamation be on by now activities, I’d Antelope market the like Department our the of the financing Award more Wyoming North Mining recognized Mark to

markets of allowed While approach recovery broader health be maintain to including to us improved have seen operations, by Peabody’s early essential we and industrial global the safety take have signs protocols and continue ongoing and pandemic. impacted the economy to production. shape, Recently,

surges in improvements can that sustained COVID-XX cautiously recent however, given are, optimistic We cases worldwide. be

led X% been Even coal imports industry, imports met so, year-to-date. production with have seaborne prices. and on through pressure from We have import demand steel steel levels. rise demand coal China, improved prices met by will tons Within coal pre-pandemic challenged, X India blow been levels year million also fundamentals unofficial Chinese of are of believe year given continues COVID controls. ultimately remains declining muted being the September inflicted current a to up Met pressures. do

response fact However, India’s potential the of nations are X well, Columbia seeing also Columbia an ASEAN imports, changes billion timing producing an are thermal to exports in has contrast, China, and sizably In other unknown. in are through growth within export thermal tons September. a as low. are with a production. for meaningful year-over-year led timing import million supply keeping Particularly due we Indonesia, seaborne U.S. all-time story as is well sizeable tons inventory eye countries. is by major are level marking COVID as whose Weak unofficial down of seaborne and thermal, on shape higher we in Major year-to-date. domestic the overhangs been controls exports XX the recoveries include and September the demonstrating down steel demand

ASEAN countries majority Supply ahead notable we given in projected to and look led rapid demand, met drivers, and expected by several growth a are India vast market be seaborne over also growth coal is to industrialization As Australia. contributor next the expected represent seaborne of electrification. the met to years. both is thermal demand be to at increases

and gains expected developed in in sharp for like consumption was fact, In economies coal still see Europe. deterioration despite thermal to U.S. in absolute generation, demand the

are still inventory seen we a what through That’s to levels, in has positivity is moving natural industry. a as September they previously elevated the demand. in decline in accelerated in We’ve was the that a be uptick positive have COVID coal U.S., gas decline is seen coal down XX% Within an pricing. generation On direction. projected multi-year utility while also

talk actions. let’s about our Now

Creek which and includes on reminds our emphasis both met portfolio, Shoal Metropolitan. improving cost at seaborne Our resetting structures

as the Let’s Creek. H-panel to continue of year. Weak resulted rates had with the costs have severely as to also Suffice customer conditions impact we’ve closet well in this being poor associated start tough demand. productivity Shoal here. elevated demand conditions year with and have slower a say, and Market geological

quarter addition, rates In rates higher the Shoal corresponding were operate, mine community. surrounding any COVID other at than with in the third we increasing Creek throughout

the the position idle poll At we to Metropolitan, we coming beginning improving and challenges, have with over focused the combined at resumes October. Given in on temporarily of fleet operation the Mobile, we opportunity of an development Currently, all conditions. this levels activities. a team inventory that needs Creek month, with Also early rates current The day-to-day just weaker stakeholders. operating market reach impact management workforce best when to better Earlier bottled year periods agreements to excavated given during additional are coupled took our scaling the customers of demand. this elected these provides Shoal weak mining Middlemount, new in in and production months. at discussions serve the we

volumes that We’re benefits beginning of has robust. been that improvement are as product to mid-vol as initiatives. change PCI fourth to well Middlemount note fully cost for quarter pleased as committed that I’m the see demand for

strip high production, mine. our to near-term seaborne United-Wambo joint lower find of quarter, this in our on quality Wilpinjong Joint from who is result will schedule production our to by to post Moving continued impressive begin and production business, performance will Wambo that thermal the people cost to venture at continue we the products. led benefit enable while to surface thermal lower and access pressures try already resilience will seaborne transition otherwise the

we court’s enable continued efforts agreement transaction. In following the terminated mine to to competitive underground the XXXX. position support across post third match at district a in The quarter. on focused scale relatively enhancing production Wambo production the to result, is in We FTC’s as continue its high the to with mining block joint demand our the we Arch back venture cost the current operations. decision the recently the U.S., And with

believe set on said, our objectives. continue That our overall its have we disappointed market PRB the We best to of assets course, We with against the done challenging producer. demand are competitiveness adjust quarter. gas, decision PRB that, our to turn responding have to operations continuing in serving remarkable it to deeply the low third job of natural cost enhance I’ll demonstrated as and to portfolio a as that With and impact profiles plan and we while changing this in Mark. over on

Mark Spurbeck

the I’d to good and with front. our success surety Glenn everyone. recent on Thanks like morning, start

to provide would an of Based period, the will basis On what collateral month of providers its more million greater through standstill meet whichever will of will we under demand of all sufficient to their million the our Based reached They’ve the thereafter, The post sooner. we is period. and surety to XXXX further assets in collateral collateral thank during the our like or leverage group future an a agreement with $XX for any agreement, million ad-hoc standstill, ratio XX XXXX collateral exchange additional XXXX an cancel have outlook, will agreement first further collateral revolving or In of request free of the maturity the additional providers we this, of commitment holders. $XX provide mining collateral extent of equipment. our of be on support additional results contingent increase to million also probable outstanding lenders any the this to to personally surety I our net and credit annual it’s million. to the letters the sales agreed substantially $XXX through immense on the credit bonds than the our and sureties. to time comes second collateral The for $XX liens collateral credit agreement. of an resolve $XXX December limit on than all existing generates is the land kind We has or the flow on collaboration providers benefit agreed with us for our reaching date fourth and surety note not reclamation. not requirement cash company enabled the believe terms agreement, not that quarter credit of of upon requirements. revolving surety draw longstanding

prior at GAAP that on is debt additional the required balance our would report the and requests September current XX. U.S. to sheet this Given surety our resolution, be collateral

are While objectives covenant we profile and our The have yet company’s extend to not maturity the business. group, to reached an primary obtain with longer-term remains the deleverage reduce agreement operating the sufficient credit liquidity. debt and goal relief, maintain

a through notable the walk few financials. Let’s in items now

the quarter revenues $XXX changes revenues million volumes in impact $XXX.X the million, of declined thermal prior and pricing. Third prior closure million to seaborne fell $XX and from year U.S. mix lower Kayenta. year weaker an XX% including from

volumes well expenses. in benefit of the These we As XX% initiatives in resulted to the reduction a as cost Glenn see lower platform. and costs actions, across mentioned, started our savings as operating

amended medical quarter, benchmarks we During our retiree industry better align and business conditions. the current with coverage non-represented to

and As liability. a result, mark-to-market was value $XX end the liability million year. in fair we reduction the a million lower discount the The result utilizing to in $XXX adjusted the prior in rates quarter

mining totaled improvement $XX.XX highlighting During the our prior performance, per the XX% cost of thermal conditions, ton surface strength quarter, our Thermal representing exceptional capabilities. the amid difficult industry segments demonstrate year. Seaborne versus further costs a

and impacted quarter, X.X of and Wilpinjong. of shipments metallurgical benefited lower seaborne coal the X.X surface ratios tons pricing from realizations million PCI lower compared during totaled mine the tons were million our improved a prior thermal ton. during per tons at an X.X at coal million $XX tons price mix the higher exported of average and in As quarter. geology shipped about X.X Seaborne we the short the year, Wambo Of to million realized

the volumes, to steps ton third to seaborne too Despite improved take XX% met our to hold. the are quarter we’ve seaborne of beginning the costs compared taken it’s high, XXXX. While lower improve still within met cost segment initial per

costs in reduce $X record U.S. The have to spend, sales per as as ton. been impacts and the demand. costs. mines thermal optimization third costs our very the condition-based well PRB monitoring Lower mitigate to successful XX% of quarter reducing under maintenance cost of just related lower fuel, in lower and margins low our posted of reflect Finally,

The our million a recognized been have one-time clear, also cost record to ton without in benefit. PRB the cost We to per one-time EBITDA this performance But generating be $X.XX led would just of in PRB performance the quarter. $XX a mines adjusted benefit even strong of PRB.

million. flow perspective, Our quarter million of flow million cash of other an generated cash with thermal a $XX generated the operating and ended additional mines U.S. cash. $XX we From $XXX

in expect a costs longwall product anticipated are mix. Looking quarter, to third slight improvement changes modest decline to be line seaborne quarter. largely planned a to with fourth cost U.S. seaborne due third compared we thermal rise the thermal in in met in at a should Seaborne the the volumes shipments quarter ahead and Metropolitan Fourth move and to quarter.

have for million thermal and of U.S. committed of the sales quarter. million tons delivery in PRB X fourth We XX tons other sales

million X the about to full XXXX have of for tons have of approximately year seaborne also year, $XXX and XXX,XXX reduced expenditures SG&A thermal exports of sales. We million to in both addition capital million remainder and respectively. been sales seaborne met tons the $XXX priced

demand additional Looking coal further U.S. demand seaborne of the ahead economic also benefit XXXX the to same thermal time, the gas recovery. higher prices impact market and retirements. should indicators recovery forward economic At natural improvement from in suggest plant offsetting and

production Creek, Our as factors, due transition adaptability phase. the the include anticipated resumption market specific company the well initial on sales remains depend ultimately joint lower Shoal production conditions, of will the paramount. United Across as Wambo organization, entire venture to other at from volumes

ensuring doing adjusting to and progress, questions. structure demand, We our flexibility. like over for to resetting solid the we’re more. financial while cost to are made turn call committed we’ve I’d Anita? And now changing

Operator

with you, Thank Please from BMO David our question. Instructions] from first Markets. ahead take Capital your We’ll [Operator question Gagliano sir. go

David Gagliano

in quite Okay. that taking had bit I Cleansing guess first. projections with regarding I question, Material. – through separate my are of question of you there. think. was a for XXXX It’s filed There’s wondering, Thanks a actually the call X-K the to a from I’m talk I through call? on any or XXXX, here going this of information, And those projections lot subsequent like good on just today,

Glenn Kellow

of XXXX. include does They’re Yes, Wilpinjong X-K answer business The through projections asset remainder to there. the happy questions. for and I’m XXXX. XXXX through Dave. Thanks has The the for the question. out projections

David Gagliano

Okay.

Let me ask question. this

total just just company projections I’m On for for as we want expect RemainCo for there XXXX, together make that not to any any those is years XXXX RemainCo if reason sure next Wilpinjong add not, for those I the the be, and reason assuming exams and effectively to guidance two to now?

Mark Spurbeck

our mid-year obviously, come David, now, whereas typically annual with the of – we we process guidance call. undergoing, budget projections, XXXX, at kind formal out will the of are our next

David Gagliano

then showed this filings, drop September or for And other month? million don’t went looked know liquidity, out just it on cash the million what I came $XX the question Okay. morning, $XX from down balance down went XX-Q I one think the the other that October, total was cash to like it reason or so balance, in

Mark Spurbeck

I some as or think that just of potential the availability working company’s capital well. think, changes receivable securitization post-quarter in under is regular accounts the I facility movement,

David Gagliano

Okay. That’s it me. from Thanks.

Mark Spurbeck

you. Thank

Operator

And we’ll Mr. ahead. Please go question, from next Mark now, Instructions] the our [Operator Benchmark take you. Thank Levin Company.

Mark Levin

getting updates Any I of any surety you bond sale? congratulations maybe, is you what referenced and your wait of think them I on A thanks possibilities and Great, it sort Glenn thoughts the on the questions, commercial probabilities process of to ongoing. agreement. Kellow, decision still that and range there? of quarter like it like look would how look are occurring? – this a Does does mean couple probability

Glenn Kellow

as want a excited I time on that the continue range to Previously, slower joint put think wait, going of COVID, would The what time overall than little about. we process options. conditions. probably probably Mark, ongoing as we but that process the – wouldn’t bit also it, looking still a I part process and challenges to is Road ongoing Yes. options were is but has around potential at associated have we ongoing. develop at venture probably South going a the you’d talked diligence anticipated been development market in but with a Not – we expect

Mark Levin

kind next think that here, off I of Okay, mean, months got are guys, start six it. materially over there change but at could would that is, position? answer both this quarters you look that sale sale come assets looking portfolio, the I three sort And are attractive optimizing that there opportunities happen that always you’re ask you any the other something any when to you of asset – or cash your the to

Glenn Kellow

to same look agnostic given and the is Probably as going in value to the give to we’re how what past we’ve created. answer

but portfolio, to on continue We want items. wouldn’t to individual look our across I only speculate

Mark Levin

Okay. guess – And that the the can is low XX market way book final didn’t you for on guys sort or your report is just then you contracting of reporting what think pricing, XXXX, any I where to in XXXX? is would thoughts my And the kind in where question the be the in looks PRB of for guys about XXXX? today provide then, if like on you XX,

Glenn Kellow

projections until million Yes. XX year. view tons, typically We’ve XXXX, we materials around but of to into quarter the first some through guidance our give additional bring around the around wouldn’t given next

associate the be improved that this activity probably, We’re improved conditions, seen of moved an on going But below of the would the drawer job, has up with be support we what the probably this an seeing quarter, having conditions that, XXXX. means probably fundamentals we’ve market that obviously, contracting stockpiles with further do and and continue poising to stockpile next on anticipate to into should a amazing typically contracting comment level current would done so highlighted fundamentals. draws encouraging. we the prices contracting but year. and I’m to not level that gas That same we’re respect amazing look payoff, and have job,

Mark Levin

have sell, and by coal you on maybe, just what what that’s yes, my how I’m guys but you around been just And what’s curious comments? guys it you’re China, is into so are how the expectations any and market import impacted China, there, ban going unofficial the seeing, it. your question around impacting into much Got last don’t but seaborne and

Glenn Kellow

coal under Well, into about we thermal, tons million of year China X.X have tons a sold mostly, thus just half metallurgical million about far PCI. million up tons of but X this

what arbitrage those represent conditions. what’s price. than would metric coal, China moment, for otherwise everyone but clearly, case, coking seaborne – going probably not the call, has $XX it of import of sentiment place. at metallurgical of fundamentals in – been gone to is ton, case ball likely at more forward, otherwise happen hard impacted that supporting We a when as markets the crystal the to which terms fundamentals stable more import any you into on look would higher suppressing more else, what’s and than support in don’t of have the would terms the Our wasn’t restrictions on a about that I if apparent particularly same markets in power is probably it the but favorable, are taking

Mark Levin

Okay, very great. much. Thanks Appreciate it.

Operator

And Lucas Pipes from take Securities. our now, go B. Instructions] next we’ll [Operator ahead. Riley question Please from

Lucas Pipes

good everyone. Hey, morning,

Mark Spurbeck

Lucas. Good morning,

Lucas Pipes

agreement us Mark, the more mentioned, good And ongoing catch to time, surety some contingencies and much. that all through would you maintenance, to make surety very could on one secondly, then remarks, there prepared you covenants any job in agreement? of them. I Mark, walk Thank sure the you be just want related those

Mark Spurbeck

and thanks Lucas, for Yes. questions. comments the

on terms needs – the surety standstill. the increase by agreement I wouldn’t ongoing lenders reaching there’s on speculate secured option that speculate December or would with and we the creditors or with – no wouldn’t will XXXX standstill be and certainly RCF contingent it that no agreement any if January. agreement, collateral maintenance the company’s you the And to negotiate participation then in there’s covenant, end the on the the surety extended First, is XX, of collateral completed by an to the noteholders upon transaction.

Lucas Pipes

you the and Got demands agreement relates have as it if contingencies into it. met goes these sureties, additional XXXX. effectively effect, no are But would the through to

Mark Spurbeck

post today, million would to there in mechanism addition in collateral $XXX again, a collateral with – along The $XX assets XX $XX cash provide the per if greater period, And flow there we year. will than to than of be be it the sales collateral generate more right. then, upfront million. million free in That’s is month additional

Lucas Pipes

anticipate going a at encountered had X-K additional of this of to really announcement, elaborate was in good challenges you. how structure appreciative, address sense on helpful. you out and what Very And you how that them you that. the minus kind Perfect. today. elevated X-K was on cost Shoal have the can the job Thank some then, you. the idling secondly, you time But color better And mentioned operative, forward? on Thank Creek provided and

Glenn Kellow

Thanks, Lucas.

I biggest quarter, the adjust longwall one in think, as the on able room be to more market – operations have we pillar – disruption last to much of said had over to probably adjusting able and operations that challenges we’ve back. with is to surface playing we seem to certain those and being success had our

also challenges community the it at the On of the and been we one we occurring year challenging longwalls, did – broader time in in Creek came also our that was improvements impacted by On things. mine it’s been around work system, also close sorts conveyor Shoal community COVID. has of transmissions think of a geological had the those quarter top It that, talked of the about doing more H-panel being in belt in areas. the encounter that at talked – out were the upgrades those that and around, third

really the when led I the try going what at them. move And factors, position. the and seek at now on to elevated time looking base strike have looking to those and – continues focused of to same think, forward to demand is reset would cost All the cost we’re

on position of it cost targeting and are range the busy So moving are forward. improved a activities an – team

Lucas Pipes

over appreciate and you. of I’ll best Thank that. luck. it I turn

Glenn Kellow

Thank you.

Operator

to questions the appears further your I’d or at for It like are this host you. Thank call no to back any additional remarks. closing there turn time.

Glenn Kellow

industry thanks you amid No, for impress difficult thank and today’s the in participating you, everyone and operator, to To conditions. and our these employees, questions dynamic look, most call. continue

transition to and our of the into and safety as all And grateful year appreciate Operator, ongoing we Thank call. and continuous your investors, of to ongoing engagement your commitment health we you. for concludes the ahead. We’re that our improvement. spirit support

Operator

your Thank call. today’s you concludes This for participation.

You disconnect. may now

Peabody Energy (BTU) 9 Nov 202020 Q3 Earnings call transcript