HCC - Earnings call transcript Q2 2019

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Operator

Good afternoon. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Met Coal Second Quarter 2019 Financial Results Conference Call. [Operator instructions] Thank you.

Before we begin, I have been asked to note that today's discussion may contain forward-looking statements and actual results may differ materially from those discussed.

forward-looking SEC refer filings. regarding press the information and release more statements, to please company's For financial this I www.warriormetcoal.com. that the investors posted non-GAAP section the also company's company discussed have been located company's has reconciliations asked earnings press of of on tables the in the call to release note measures accompanying during the the at website

at section supplemental earnings website In company brief to the the www.warriormetcoal.com. a release, slide addition of the investors to posted has presentation its

discuss Financial to are begin Walt Scheller, today results Here the Mr. Mr. may Scheller, company's and Officer; Dale you your Chief Officer. Executive remarks. Boyles, Chief Mr.

Walter Scheller

remarks, Thanks, expectations to ask detail, questions. for have and to Dale taking our to operator. results us and you exceeded well sales the our quarter today opportunity second record thank which discuss quarterly join everyone, the Hello, the our then time my XXXX you'll will Warrior in and led review volumes. additional exceptionally quarter, to second in high performed After results.

performance Warrior cash the million. million volumes that sales production the The $XXX drove high mines quarterly and of levels $XXX high achieving we EBITDA a in adjusted high revenue, record of achieved million flow $XXX of record free and continued strong

In of stockholders commitment a addition, we dividend. of payment continued to with $XXX cash a our returning capital million special

of XXXX, compared to the produced quarter Production in second tons the X.X remainder will XX%. same sales of the half for an was million market in the performance year first year later. we short million for we’re discuss of XXXX, As in increase the raising volume company’s production of which quarter of result volumes expected conditions our and X.X the the guidance and full

were longwall in managing our moves the the that planning We move our equipment anticipating compared achieved than our no longwall demonstrate the made quarter quarter efficiencies to the driving by expected. employees move, longwall efforts downtime. year significant and production results second of in levels and better proactively These in successfully second XXXX this one completed and production

we've the and The environment. reach less as over mines equipment that to production a downtime efficiencies we utilization three capital continue investments pay and made with years our off, strive improve to better full to in capacity last safe

from the completed A recently days good is reduce the of X a example production extra should we extra shields longwall the minimize purchased on the also impact that to that production set quarter This geological move and the takes that the risk event conditions. mitigate of that encounter provide longwall we mitigation number to longwall move. periods longwall downtime of shields set of flexibility in and from additional unexpected Mine

same during million a costs to The includes extension Mine last the expenditures North. we X of company into year panel X capital longwall spent on period the million and $XX amount in next development the second plan quarter mine call compared $XX area cost of This year. development this mine the the for

XX included the new shaft as power system. Extension of X be facilities including and When pages equipment the it our of can new on service addition, state-of-the-art cash and and a portal, hoist presentation a and North feature website. seen bunkering spending bathhouse, XX completed, X In will our investor on construction is the North substation

six capital that sometime same time spending spread years area next expect that and in in to over mining the the intend longwall be to We to five period.

of to and the new be compared X.X from quarter quarter in strong higher second short of record our set second this same the of XXXX. than XXXX, customers XX% during high volume were quarterly quarter of tons million Demands Sales year. to the a continued

year XX% into was by XX% consistent the South mix this in geography were Europe, quarter. last America The the X.X% XXXX in with of sales in overall year’s and second Our geographical quarter second Asia.

Inventories the supply port. We optimizing inventory to volumes. coal deliveries manage first in to higher short flow the levels primarily our the due short chain decreased and met tons sales while XXX,XXX level continuously our possible quarter of XX,XXX for to tons the lowest

impacted level caused factors actual of storms Our that schedule [Indiscernible] such Gulf. coming in could inventory related be primarily alerting by significantly several as delays are by

metric Platts price quarter it high May The mid price from metric a index getting a declined premium $XX strong. than The $XXX remain second as conditions quarter. Despite metric market overall a lower ton where the volatility, low much the index June. of the the vol closed Australian started $XX as ton a at end its

the Platts price blended was and and demand solid the no mid vol second coal realization. was down percentage from gross There our actual fundamentals low Australian met vol price sales our from the Remember sales. rate on was price discounting our high FOB special gross due to of slightly the price prior realization is premium quarter year Our the for XX% index period. low and of resulting

From of in a at perspective ore. quarter the decline and of finished costs margins to saw falling rapid pricing product in producer iron primarily market increases a beginning global material combination the steel due the their raw

erosion margin theme different across the had common was world, regions reactions. a Although different

impressive for year-to-date one continued production supported stimulus of its government iron record demand steel X.X% domestic the on products. achieving to China pig produce hand as levels at growth an

half China below strong by the the Despite global to but driven and India. saw the to South line margins, heightened in compressed in in first production and from competition volumes, for order by was America grew steel XXXX. several with softer some orders. production output increased especially the of iron match imports largely steel extent Production with the headwinds XXXX of demand XXXX, expectations largely X.X% apply facing producers customer pig Europe cuts sector

was consistent met for coals to our the coals premium there sea well significant in starting perform Demand during supply for customers. any and quarter, premium pricing the of the pressures the strong system was Pricing for erosion quarter strong borne remained despite on but mid-May, margin most a slow, disruptions. our without in as continued

to performance our of the strategy Warrior’s met business highly demonstrate a continues as pure-play value premium unique record coal producer. focused

pricing in experienced of to not business over the continued in any We've is cash goal stockholders appropriate the We've profitably Our years. invested couple we've in generation environment to operate to as past the where our reward conditions strategy. support also warrant. flow just maximize favorable this and conditions

in Our as operational successes perform hard our and dedication second are of as I for work employees them help we doing credit to they've to quarter. thank the been us and did the strongly all

that most important in remains and priority top working and the achieving safely ultimately marketplace. the Our success is as efficiently to working first step

quarter, discussing provide Blue to strong growth to addition I the an on project. our wanted update our In performance also Creek second in

You presentation can website. for on Slide our XX refer XX to through quarterly investor our

reserves last quarter, the of of high met stated the coal in remaining premium few one is States. As untapped vol United A Blue Creek

We has are Creek excited our the to the value believe by Blue to from deliver promising stockholders. significant results early work potential our and

Our of tons initial the mine the on life work of of XX has potential years. a focused X XX operation million to longwall single short feasibility production with with approximately annual

studies have continue over we approximately a $XXX While met million of of to XXXX, robust These studies in million prices. parameters coal range our $XXX to capital initial expenditures estimate demonstrated refine five years. across returns project initial

and Creek’s for momentum the transportation belts, activities Warrior partnerships The working potentials and million pursue to possibly marketing parameters. coarse continues evaluating X are several These obtaining maximum of project to currently permits and is maintain in slurry Blue etcetera optimize board core slope, that refuse rail additional solids finalize desired. the production project company data, activities full approximately to plans and and gather tons plans construction for include to allow drilling with to vendors storage including which prep ensure several mean longwalls strategic if would short geological plan development areas. to annual

Additionally, arrangements as we uptick to alternatives. explore continue to as financing project well plan potential

position We make Warrior be permitted early and XXXX expect would in Blue development. at future point a Creek will be a shovel by on ready decision fully to which

We're several our potential future months. forward become cornerstone and Creek see We of to excited the providing Blue by portfolio. the updates extremely stockholders our to over the to we look the next project believe at

our Dale detail. results to I'll in quarter now second ask address greater

Dale Boyles

Thanks Walt.

quarter $XX net million compared $X.XX For in XXXX. net per share diluted of income $XXX the share or second was of $X.XX quarter to diluted on or XXXX, basis second a income million the GAAP of per

adjusted diluted share Excluding per income or for other share compared per second net the the income, non-GAAP in XXXX. quarter $X.XX to quarter diluted $XXX million of non-recurring $X.XX second was of XXXX the

period XX% EBITDA Adjusted that's in by adjusted primarily $XXX increase a second of same of an selling in period high which XX% a and volume sales compared X% increase new in in XXXX. increase over quarter XXXX, EBITDA EBITDA was of $XXX was margin second million to XX%. in quarterly adjusted second of a was The record same quarter compared average prices quarter The year. the driven XX% company's the last in the million the to set quarterly the net increase

were second period the The strong the of June. continued short per to revenues increase in second to metric XX% from the price in $XXX second sales $XXX end increase The at the XXXX with period the in XXXX. quarter environment ton metric ton slightly year. March $XXX Total prices compared price quarter increased be approximately at average in net million same to to same last to the of of the in index primarily compared $XXX falling quarter selling per was in end million due the This X% volumes. for

Our the Demurrage this $XXX to year. average other gross and charges quarter the in last price reduced price period to second net the second price of year. same an our selling realization short quarter XXXX in ton of compared was XX% of $XXX per realization in gross

higher to port was the capital in prior revenues of cash mining are of second The $XX in spending in port is the in was periods second to reflecting per Cash benefits that ton mining investments Mining short FOB quarter second the sales, due paying $XXX the compared sales, $XX of of in XXXX. XX% the primarily to of or million cost and revenues XXXX. our million or the cost quarter $XXX XX% period production volumes production lower of compared FOB of approximately nicely. decrease same off XX% quarter

last about million year. period, X% were the to due same down recorded or of year approximately in in prior million second in period $XX quarter the primarily higher expenses to $XX expenses revenues compensation SG&A total compared stock the

were the expenses quarter XXXX the million volumes Depreciation last The expenditures. high compared capital year the to of in production and in X% to to compared and total depletion of primarily in sales year quarter million or investment due second period revenues and this continued higher increase for our same $XX XXXX. $XX second was

same in debt plus amortization our was associated debt the of on to outstanding to last quarter compared facilities expense million $X interest partially of retirement offset our second about year by early the XXXX. about lower a with due million of our cost in Net period our portion $X interest of included was the amount This debt and income. issuance interest the credit quarter first

$XX income proceeds million material in affiliates Other Energy XXXX. was outstanding recorded amounts the Canada approximately received the in with additional proceedings old second in unexpected its of future. settlement from claims. a bankruptcy expected to for No quarter the and Walter Due are of

the Company utilization NOL income account expense net of losses taxes. primarily same the zero income deferred in expense decrease last with the sheet result of balance during of reflects second quarter XXXX period or reported non-cash the in year. tax corresponding This and our $XX operating million

continue XXXX until XXXX. our in expired. the NOLs evaluation in recall, federal tax the of XXXX and income expect income to utilized NOL As the are second released paid allowance our to deferred no We liability the will you on NOL fully cash or of and taxes quarters the state reduce zero utilization company's we associated taxes fourth quarter of and may the

drive We conversion next significant will years. expect cash over continue this to several free the flow

receivable million company of cash and cash $XX flows of flow expenditures development was was second of year generated $XXX by higher XXXX. the net which used of average to record of due credits This second free to cash Warrior cash compared selling cost A the capital million, million was result of of to in an working flow, during flow. the higher in of a quarter tax $XX sales Turning free the This million this primarily operating the lower quarterly million. decrease for record thus in The working and decrease prices result due capital provided million. quarter, $XXX in collection capital AMT quarterly $XXX high the $XX primarily cash high to receivable and the volume, quarter million. mine of accounts $XX a of activities income second for

activities that $XXX during million dividend $XX included same related new the compared second union of year’s of million in for for Mine to primarily to panels This of developing investing $X $X in costs last of period the continuous quarter capital expenditures quarter support a $XX North were million Cash the special and of used was year. in the financing second quarterly cost and incurred X cost mine XXXX of development million second and the miner development area. consisted dividend in quarter plus of activities flows the XXXX $XXX used Cash longwall million, were X million. payment in the results

strong a EBITDA. than less of with remains ratio sheet balance X.Xx leverage company's adjusted The

approximately $XXX end facility. available as consisting addition, have $XXX of liquidity In we of of and million million sheet if second We of equivalents and cash provide available generation us pursue million of to free decide we million. credit cash significant development total our flow cash the of project Creek under the next of with $X strong letters ABL quarter outstanding ample and liquidity our $XXX of our Blue flexibility balance year. believe will Net

with volume free and summary, performance strong cash In with flow finished that quarter financial continued the we operational quarterly performance. drove high strong record sales combined second

for Now guidance our to and XXXX. outlook turning

of volumes conditions non-cash for expect the the for our with strong XXXX the the in has have respect company complete XXXX. deferred full total remainder three tax year XXXX. XXXX, market in and to three in to updated of moves guidance production considering company’s first income of compared of longwall more half remainder other had and maintained the After moves and for expected sales the five XXXX. The the in expense of its year for for the guidance total we this a We the to full items performance year we moves longwall year

cash mine million XX% short guidance tax coal to port of $XX income cost net million, million, expense short XXXX of of tax million deferred is a million ton, the million coal production million, of expenses $XX per $XX of million tons, million million of $XX X%. the tons, to to cash cost of Our X.X of million interest to sales year X.X FOB follows: X.X to to development to full sales as of X.X million, rate $XX expense $XX $XXX non-cash SG&A short and expenditures $XX to $XX capital of $XXX XX%

during the quarter, the of Global would I was Management all company. by Lastly, the Apollo like that to company note sold that remaining had second they notified the shares of common stock

originally advice them IPO a equity investments result, to well. that Warrior exited wish for company before We now their As expertise all the private respects. all material and our would have and thank firms in like four their them owned in

I will Walt now for back comments. turn his it final to

Walter Scheller

Dale. Thanks

and company’s stockholders its appreciate second we make our move comments like to with of we XXXX received about pleased our and few Q&A, very Before onto of and and the engagement in from company course I'd a we and the more employees. support the strong quarter performance We're prospects. financial operational the

and from will sales production our invested we've the volumes operating our leverage projects have in increased, long and in benefited operations As increased that benefit future. the term have

contracted our expect sales to sales portion directed and expect the spot consistent volume year for Asia. that of remain toward our a will We be higher

programs undergo quarter. demand in spot tempered As American Europeans the South maintenance steel large producers and routine several remains third

pricing, indicators previously the we to next some remain reversal demand the continued cautious pressure on point discussed. Although and to due pricing bring of quarter expect early a index steel and reasons

of index on seasonality to factors pricing. seaboard we chain expect the reliable the addition, typical some anticipation have a in In bearing supply the

first XXXX year, considering for of XXXX expected and half the noted, of Dale targets. guidance our operations remainder our after the performance updating of in conditions the and we're market the the strong As production sales

allow adjust said changes if the as downturn we I've year. business next issue operations and just throughout targets on the flexible previous as environment us market As conservative corner that around it are calls, to run the the pricing and the to geological with

the guidance update changes to business. as to XXXX during and expect the market changing We necessary in conditions our the year adapt

questions. to open like we'd call the that With for Operator?

Operator

with [Operator Our Please question. comes Gagliano from first David Instructions] from your ahead go BMO. today

David Gagliano

The to the every taking asked questions. for you've you been question that call. basically Thank my almost is ones similar after really

ton the the the something market on the think conservativism the just it to it I remarks. a roughly, Is You this ton it's even guidance address pretty volumes factors raised likely or longwall decline conditions an move sales up a is and chalked for obviously impact second at in million on is, about going that based you million or your half one a prepared year first question while mine? bit looks versus in still more after My additional on of half. conservative

Walter Scheller

just way We're we're do do, our We way as longwall No. or we just being can anything operations weather said have three I normally conservative we have in Gulf. approach the happen the things and tracking at always with doing moves. the and we expectations

just taking a we're cautious approach. So

David Gagliano

that thanks to box wanted Just check one, much. the on very

Walter Scheller

Thank you, David.

Operator

Our Daniel question. ahead go please next with from comes your Scott Clarkson, from question

Daniel Scott

Thanks think guys, substantial from is builds check well the quarter done. had notes great I I My the my quarter. inventories. first really quarter in question a If you first call, about

it that a way, is XXX,XXX draw. kind maybe production minus is of this of Am coal about sales based just of tons timing shipments? slight was around on good pile the quarter for there and that I I pretty is think thinking still a right and

Walter Scheller

of still rest of There down year. the coal that decent the amount through a is sized work Yes. and we'll

Daniel Scott

especially kind thinking, share when going paid start another think you're Blue these money about versus maybe to amount special hoarding maybe a tremendous forward obviously you a days. And in Apollo out generating of anticipation of little cash Great. incremental now more special, or we're this about, Creek? with repurchase dividends you going Where's of

Dale Boyles

Dan, policy. really its exit; with changed nothing allocation Well, Dale. Apollo’s haven't capital has we changed our

We continue. are going to

plan we’ll dividends. a repurchase consider be new million also executing We that $XX have special that will

we but do we in policy. once time our we for get changes get finished, into year some know points capital any what As may Blue later Blue right have direction the that we're our analysis that the Creek in with Creek allocation out after to definitively and going

Daniel Scott

likely finally mix pricing be spot That material at Do look clients. your of your And about slowness and might Asian for production Europe most tons then me, in sales shift, sense. mix you your and when is on seeing the to about makes year? kind of in see based by you the geography, a doing half next how change you little talked year into what or sales of back

Walter Scheller

I will think mix sales much. the don't change

about I think build to bit with book term spot opportunities into would in for see the same our short a year, as things it way be expect moving we're balanced going been. has Asia. But, will we Europe, it the softening next I

Daniel Scott

Is extent, course, that? I shipping guess the region to on higher quality of the that rates effect going to than to to attack just offset are that some they've been.

Walter Scheller

the I quality think that. offsets

Daniel Scott

on Alright, quarter. great, the congratulations

Walter Scheller

you. Thank

Operator

Riley comes B. question Please Pipes go Lucas from next FBR. Our your from ahead with question.

Lucas Pipes

like afternoon, another everyone quarter, fantastic and done. I Good congratulations well really second the would on to so

Walter Scheller

you. Thank

Lucas Pipes

there, not evaluating evaluating Creek. at projects. things you're and to get would much as major the this pretty kind at remind Thank up but to like I thinking the first. be out about key wanted we the excited your carried very ahead sounds still trying make of that still of to a still had this on time Obviously should us away perspective. opportunity of this kind for that or follow you're go they you're or anything, you this It Blue Could but sort of are what kind are you you issues you're point issue. project kind about

Walt Scheller

our Thank a put board you. to front year in be little goal is later this able the discussion. Well, in to the of for

to some site. to first quality to XX say additional As X mining determine for the confirm quality quality shouldn’t we're that I years we've drilling at said, confirm of determine, to holes

checks sanity engineering overall the some doing We're of cost the in around project.

the We call. are for the evaluating market

permitting additional Just done. get trying some to

have before the recommendation strong later we're to we think this could [new sense] year. a I what tying up make think So, we we board

Lucas Pipes

Got helpful. it, that's very

at inadvertent here. So, but basic market assumptions you changes today wouldn't any that you expect kind from of said the disclosed your

Walt Scheller

fair. That's see. anything but We we'll anticipate don’t different

Lucas Pipes

Got it.

the well, great appreciate Okay up it work. and Thank really keep you.

Walter Scheller

Thank you.

Operator

your Hacking next Citi. Alex comes Our from go question. question from with Please ahead

Alex Hacking

for Yes, the thanks call.

on following-up Just Creek. Blue

agreement? in You what be guess, you mills participating. structures kind of from take mentioned steel typical I just thinking a pay kind of would about interest there or

Walter Scheller

be wouldn’t we're would work as to be saying all or our with, we just amount direction pays. those pros a kind route We not cons the do going us we No, in. all total some take to to that’s we're if we're kind capital all strong maybe at the with look that opportunities, take going and nature. looking available went through of of something just and but that we're in may options cost, some with agreement we offset general something be of some to in that at

Alex Hacking

over several the sense. is makes spread of obviously in of up per what's or is out roughly Okay, kind that, it's the terms I think. years How CapEx the weighted front? equal of five heavily then cadence Thanks. years, year CapEx, it And

Walter Scheller

would the end. more loaded I it's towards heavily say back

the so out continuous slope prep but in then equipment miner shafts is after half development or a purchases first at putting couple of building months development first you plan. XX start of The and that

So, I more expect of the half little is project back would the a really intensive. capital

Alex Hacking

of you year, about Okay, the front mean everything putting thanks. of go-ahead that later and board you board talk decision year? announce when that that would And good a approves that it looks sort before in Thanks. end assuming does the this of the then, this

Walter Scheller

of would this late year probably at or late something possibly but this end look year. next I before don’t year will that have know the I

Alex Hacking

Okay, much. that's great. Thank you, so

Walter Scheller

you. Thank

Operator

Chris question next Terry Our from Instructions] from Deutsche [Operator Bank. comes

Chris Terry

Dale. me. and Walt A couple from Hi,

you've the of terms that in XX% the XX% Just for half. the to realization achieved first

slightly expect that about or spoken sort similar Thanks. this second half levels but if Sorry, higher? would already I you apologize just you've to of

Walter Scheller

I a could in a similar be days expect our trailing been we Well, the it have index I average because of the lot you so that, of on way something little it's usually basis because of could to a market, higher know works are loading to prior XX shipments the vessel. that price you the the mean following a think

blended vol our So, of on percentage includes sales vol mid impact than mid that a have bit but to. to particular sort vol go that are mix remember quarter, low that's a sales on little the sales a can some also higher

generally So, results. would I but very expect similar in

Chris Terry

Okay, against and the And you. that thank then, between thinking asses inorganic you to how just you Thanks. in organic about terms Creek continue and of Blue do do differences M&A, it potential see growth? versus

Walter Scheller

project We shareholders. is we we're do think think we at the sense look measure they it our everything present determine to in is outstanding themselves, what just against to continue an best this and going opportunities of and

Chris Terry

the run the keep And tons million final through you some a that do that there a was maintain? but to inventory level cycle sort at one me, question to of of Okay. you you from sort X.X just what's point presumably your that the have but load earlier what like bit base like down on now levels you little

Walter Scheller

less lean. or I XXX pretty just think, so, anything than

XXX that XXX range. in to So,

Chris Terry

Thank from me. Okay, you. that's it

Walter Scheller

Thank you.

Operator

go ladies the Mr. turn end Scheller remarks. like and closing any And I'd gentlemen, reached over question At conference the we answer this and to to the time of for back session.

Walter Scheller

today us in Well, that concludes appreciate Met interest again we Coal. Warrior your this afternoon. and our joining call for you for Thank

Operator

for today's conclude does call. presentation. you thank that gentlemen, joining We conference do today's and Ladies

may disconnect now lines. You your

Warrior Met Coal (HCC) 31 Jul 192019 Q2 Earnings call transcript