HCC - Earnings call 3 2023 | Warrior Met Coal, Inc.

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Operator

Good afternoon. My name is Allan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] This call is being recorded and will be available for replay on the company's website.

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 releases 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, questions. detail for the to Dale taking our ask operator. results us then you opportunity quarter today to thank discuss join everyone, Hello, the our you'll time my XXXX have will in and review additional to third After results.

strong to over record to excellence our pleased operational deliver were represented We XX% in which another able were quarter. which leverage year's third volume, a achieve we to quarter sales last increase

We performance excess McDuffie ship from the partners at us and allowed which Terminal, volume improved to and reduce more see inventory. our our transportation continue to

yet and profitability Our widely ton. China, of volume sales growth yielded well, it's cuts largest producer, per materialized. also world's not margin we the quarter-over-quarter a anticipated, generating [indiscernible] Steel than cash $XXX strong had $XX in or from million as short output stronger have was production

domestic has our weaker demand China customers' export which of impacted fact, In some steel, led volumes in to higher-than-normal has supply of markets.

of products. quarter, raw the relation index diverging pressure lower factors match gains. production the demand India, material customers' low-vol prices major demand. large most customers part adjusting to and prices result, put indices experienced their a for experienced We've In of the regions of in other lower modest exception to have steel under with upward trends the contrast, while the coal most These more other third heard With coals for premium our latter met their experienced finished during rates margins as costs. steel-producing

to contrast programs. tight quarter during the this year, producers their maintenance of coking sharp third In quarter as premium the several coals began hard second Australian was the availability

the display a In production logistical was issues vulnerability again labor-related chain the met supply with constraints on issues, slew coal. of addition, impacting of availability of the and

exports However, we China as coal continue coal as and met finding see significant China well flowing to their way Mongolian strong exports into Russian into India.

of the for their indices the period. closed at quarter highs the major All

largest of getting Our primary closing second index, the increase ton. ton experienced indices, $XX all per per the over the the at short PLV Australia, FOB and $XXX short quarter

contrast, mid-August PLV by ton delta China the $XX short ton a price with increased The the territory at $XXX. in per achieving a arc CFR Index per into of closing swung negative In between short quarter. end $XX of third industries these of the

higher the World monthly last production growth by Chinese the report, which months. Association X.X% X iron steel by months XXXX to first the to first year. approximately X.X% same According Steel mainly was the by increased during compared period grew X positive of The as production, global for driven pig

year other declines steel compared grow the to increasing the the absolute continue period. rates, to by although in of impressive period. X.X% same experienced production compared India world production, terms at China, Most for steel-producing lower to large previous regions

in more second of to the enabled XXXX. excess which increase quarter last higher XX% tons quarter our quarter Terminal, million X.X transportation As comparable product of driven of by record than McDuffie was set was reduce inventory. our in short record-setting sales the the The I export us The the previous volume our was noted, improved year. third and performance partners

volume better-than-expected for an to In contributed sales in increase quarter. production addition, the

down spot into in breaks sold by quarter The Our higher Europe, America sales driven sales into third XX% into Asian South XX% follows: primarily increase XX% the and volumes during by was Asia. in third India as into geography China quarter. the and

abnormally quarter. was inventory Our in with XX% high third the and excess spot volume

to Mine that to went they and volume average to year and moment factors a into revenue the a larger strike transition selling of a net Warrior how extent, explaining end the primarily want the I the lesser quality and mix income. X. experienced spend has price, net our sales labor of this impacted due spot the

know that As production we strike would entered market. XXXX the the would additional spot when not to directed end, towards we assuming have did be

has in countries natural our activity And India, was a year. we and China since However, markets Pacific our focus markets. spot spot the demand to like been this weak very stable on fairly turned

PLV With more common in spot in market which Pacific FOB to traditional understand priced Pacific than in it's from spot it markets on rather the the markets that how is and these basis, dynamics CFR a depending important conditions. on basis the are our Australia mind, market. differs our pricing traditional Typically, based markets

prices The ton by on market trends, currently approximately a CFR in $XX in historical these have seen are industries which the buyer PLV quarter. whenever by dislocation the is departure prices leverage, freight on moving the has which a per short a from differential's case with third trailing not borne supplier tandem average. basis In FOB CFR a

Russian of was third during on Australia. than number from the due to selling net revenues resulted end a delivered and factors, our on the coal impact quarter. average in dynamics and limited pricing based a largely markets income for rather These dynamics This China basis to negative is net CFR a domestic occurring that prices, including

levels medium the might the positioned pricing. advance, term. better us but enables in we fourth our in the we're contract more which of quarter, coming and to predictable well benefit positioned With to to impact take our product believe of the be over rise the the higher capture pricing we'll in not in becoming quarters, this see headcount advantage of production We

the than expected the is year, last highest million volume million result This X.X for better at additional the a in was to X third totaled since operated tons other third a of compared mines and output Let's record-setting labor of quarter now representing details our return the to short a same first performance. of higher Both tons quarter this quarter XXXX key quarter and levels capacity short Production Mine quarter returning from increase. production as X. employees quarter of XX% in quarterly in strike. the

year's second of XX% quarter. the short at XXX,XXX to third third tons higher quarter the quarter Our XXX,XXX over in The inventory drove headcount volume quarter. compared in down was production coal from to sales higher our prior third the the end the

million in quarter, $XXX mine development. which we CapEx million moment. third on which CapEx Blue discuss spent more $XX million, the and was spending I'll a project, the on Creek $XXX During included

CapEx than during of Creek. spending third at spending timing expected Blue to lower little was due delays some the the and quarter in deliveries a equipment

full However, by within our year guidance we end be spending year. the to of the expect range

as development Mine the of spending was $X the X. we during completed quarter million Mine third development

Now to in for quality from we're Mine the area similar new high-vol a to Creek. which mining that X, is the A, a Blue we're seeing mid-vol transition in

world-class Blue to development Creek Turning of asset. the our

schedule. pleased I'm remains to the quarter, progress on project, During share on make continued substantial our to that and we the third work

miners fully production to make allow ventilation we connected the the year continuous start shaft, third service to to the progress will quarter, next shaft, on During development. continued be slope, which

develop bathhouse construction for the the the belt well continue the as we site addition, In the preparation to warehouse. of structure run-of-mine and as plant building and

We million $XX Capital year-to-date. and Creek quarter Blue spent for of $XXX the beginning the were expenditures during totaled million the third the $XXX since of million development project.

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

Dale Boyles

Walt. Thanks,

third decrease income of recorded year. $X.XX $XX million in over same the the quarter share, net net of of of For million GAAP or a or a XXXX, $XX per diluted last on $X.XX the representing diluted quarter per company share income the basis

price excluding quarter, adjusted share income diluted debt, extinguishment for $X.XX net the other per net interruption This loss adjusted share. on early income $X.XX compares business of Non-GAAP to was of the a results nonrecurring per the expenses, sales with and XXXX. diluted third business, our average quarter-over-quarter offset primarily in combined the of financial by lower same quarter which driven lower higher from XX% by decreases net These XX% partially selling volume. were were gas

in decrease year to last quarter million EBITDA third compared The $XXX in same of adjusted million was of primarily this factors. the quarterly by number driven reported We quarter year. of the of $XXX a

price our coal net of lower prior was year steelmaking selling First, the the XX% than average quarter.

financial Second, from as saw our we results gas I mentioned, lower business.

in However, volume these cost. offset by transportation were and XX% partially [indiscernible] lower and increase sales

compared third quarter the in this quarter year XX% same XX% of year. was of in margin last the to EBITDA adjusted Our

the were in this the million to of Total third primarily gas increase sales million third was last XX% prices. $XXX selling year. X% to lower net average This business periods. compared the to quarter primarily increase year from quarter XX% gas a due in the offset prices $XXX the between in volume, the revenues decrease of by in natural due in XX% revenues third our in XX% Other were quarter decrease

third upward due The the a of Platts did to we the until rise the end. its price for significantly from the quarter, FOB record steady towards not Low Premium trajectory sharply Index occur but quarter, Vol did increase remained slow much in Australian third on late the rising timing. benefit not Since

short The quarter averaged ton $XXX quarter $XX index the price the index third quarter. year. to in the last short averaged compared higher ton same The per third per in of price

reduced charges other ton the severe net the average of third [indiscernible] last to year due Demurrage to and last short our $XXX compared delays lower and congestion. port weather short in of last in ton selling other price other year. charges third per compared the higher million per third Demurrage $X the quarter to were in and quarter. to this quarter quarter charges $XXX temporary demurrage The and were of year's result year same

$XXX or and million year. selling increase million royalty mining of costs in million in sales, quarter sales of in third XX% of cost of $XX sales $XXX $XX net net transportation the on was of mining by was lower quarter the partially cash increase XX% offset lower revenues or million Of in of $XXX due last the to XX% compared million Cash volumes, cost the prices. average to third revenues

of was XX% strike this compared second strike the this focus addition quarter quarter employees hiring returned to labor the from workers labor year. higher a and the during due in in third year headcount on Our last who the of to

In XX we expenses experienced addition, last operating in months and equipment over steady. purchasing has the remained inflation the

down far this have up seen any not changes We so significant or year.

] per FOB of cost was short to $XXX last third in Cash port of third year. approximately quarter sales [ the in $XXX ton compared the quarter

ton our premium resulted This in lower. the were coal in steelmaking year last per quarter XX% XX% in same the which in this our quarter year, compared third transportation average were quarter net last lower to compared While the costs, XX% to year. third prices higher cash were of prices X% of selling cost loyalty

Our in cash the ton cost compared of third flat for quarter strike, incremental despite with per quarter production other neutral the of associated the words, volumes. incremental per from third production the despite higher was increase to In the the third headcount. returning XX% cost prior ton short year to the the on the we in were cost cost due labor our employees quarter as

in in earlier. this slightly in to per by as than and total SG&A quarter this third Cash ton X.X% revenues were noted volume, increase expenses year Walt the of due last impacted higher or and year's year primarily about margins were higher an expenses. short third were $XX $XX the million quarter of were employee-related spot quarter third the

cash The primarily equipment earning high third the leases exceeded cash outstanding income balances, on sound during our of and well to quarter our notes on the year expense due interest returns. our this interest investment earned investments

reflects expense on for an includes and income intangible expense tax expense income quarter third benefit depletion income. income pretax foreign-derived tax Our and

our we quarter, to successfully part secured our favorable by commitment ratio. market the advantage conditions, sheet. enhancing debt-to-equity of as offers our of $XXX already tender our manage By our for strong taking leverage XX%, reduced balance during Also million notes or we ongoing senior executed effectively nearly

retire and represents the connection action, on fees early recorded expenses of this paid debt. of loss debt to The in we with the associated and the transaction. premiums connection loss extinguishment million $XX with a In the

In more amount an addition, special time approximately ability the time in from repurchases form company aggregate payments of in up the or the or to the stock will make dividends one of $XXX future restricted to million. have to

including and repurchases or performance a of discretion future any dividends and of other at investment special factors, the subject stock However, market Board strategic the conditions, to future and are opportunities. number business financial

the is During primarily last the year. labor business incurred third end strike nonrecurring decrease $XXX,XXX, quarter, significantly of interruption due we which the incremental earlier expenses of The to lower year. were than this

legal ongoing expect incur negotiations. associated the We expenses to ongoing with labor

cash flow. Turning to

capital generated was third of cash activities During cash million. free result million XXXX, and of for was This [indiscernible] mining operating the flow of $XXX flows $XXX quarter of cost cash expenditures $XX million. the by used development

in in in was offset higher was second by and net spending. of million to cash receivable Free from and working due higher lower flow and negatively activities Increase the increase of primarily third operating in sales due Blue net last significantly capital increase Free year's quarter was accounts to an partially $X volume, impacted accrued from working quarter inventories higher lower than payables in capital less Creek expenses. year flow XXXX. generated and cash primarily third a this the CapEx by cash quarter

been $XXX project the a special which year has have on of million, year-to-date, of this the top dividend Despite to dividends. associated earlier stockholders of free the flow higher capital of Creek the Blue million cash we quarterly returned $XX in regular form generated spending with

the $XXX $XXX available previously million quarter and was quarter and facility. quarter the equivalents of decrease and under is and related available to of Total the consisted debt million of liquidity of during the cash related the cash million, The over third as decrease at and ABL $XXX our expenses fees representing $XXX second million extinguishment end of discussed. third a

our guidance Finally, our changed updated section release. as year the turning and our metrics earnings interest in prior development outlined for other were guidance mining No to and outlook XXXX. release. key our We from our of income, outlook for full earnings

year, end between be our production quarter in our will midpoint in for Since the in our guidance fourth and sales our discuss will a range should lower the be as volume volume It's we full similar volumes for quarter. excess inventory quarter, our worth noting lowest third fourth amounts of Walt fourth upper moment. the the the quarter reduced year and the indicates implied that

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

Walter Scheller

Dale. Thanks,

quarter, Before like remain we Q&A, indices. of I'd situation fourth the to We in price of Middle cautious make and also light especially the over East final because move distortion to comments. in the evolving some the in for

year. remain but stable is the the Demand expected weak for steel to until end of

However, we in the economy on uncertainty demand. do steel recognize global its closely monitoring are impact and the

fourth in of supported by We gains quarter, expect met [indiscernible] coal back during recently, some pricing we potentially pressure to saw remain the availability. mainly the improvements coal under expected

inventory, For that performance volumes to we implied expect to compared we fourth Warrior, guidance. now lower volume our be quarter full excess our reduced as seasonally year-to-date by year our our

contributing volume those There are a of number factors lower fourth to quarter expectations.

First is markets. customer our natural weak in spot the demand continued

we end fewer that holidays. the operating with the is associated Second year days of have

a some take perform we'll profitability hard premium maximize maintenance. fourth, mine more and spot needed approach our into strategic market. we'll coking for Third, And market the coals pricing to

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

Operator

question Lucas B. comes first from Instructions] Our [Operator from Riley Securities. Pipes

Lucas Pipes

X questions remarks. color there, Dale, My first Walt. the tie prepared your final in comments and in appreciate the Walt all to

end tons. I the guidance year to think for come full the for level to on to output. side, go to looked about historical out when the see have I production production, I have of implies And you that that back I'd low and when of course, the XXXX what of at and X.X about QX, strike million your First

would that guidance -- seeing side? mine on for you to maybe that of a your anything this that production specifically plan year Or degree end are the of low is just the lead So full in could conservatism. the

Walter Scheller

extraordinarily conservative. one that a -- that's would No, be

X, X I Our a number, would X you that. that. can X, something well XX, expectations say like are X above X-ish X imply

Lucas Pipes

for And QX? production that's

Walter Scheller

for yes. That's production,

Dale Boyles

of Dale, to you sales -- Lucas. is kind you those volume this if year-to-date near take expect think be probably And similar the And expect get a would I of end number. both I kind guidance the right of I would would of our results. just upper

Lucas Pipes

side. PLV tie In Got percentage would discussion very want benchmark it focused in for to be the the keep what inadequate as the sales What Lots those might to That's there, spot the commercial as what spot do discuss be it. volumes? more FOB to of but the to to exposed? would maybe quarter, And best anticipated for fourth And I use Australian then percentage just now. index? is linked be your helpful.

Dale Boyles

Probably be be an on XX, PLV or FOB contracted This volume I into PLV or be And India about could could Australia. CFR the rate spot on a think, But If XX%, it where is AC X/X the should the China contract index, be is Dale. quarter. that index. fourth be at Australian just should goes. depends some -- could goes India, in that that

Lucas Pipes

a be potential pricing So efficient. of will is range you indices, there and

hypothetically, Now what indices those that would price conservative you of of the most today? be netback mentioned, range the

Dale Boyles

that talked really not I rates don't be a R the spot greater suffice dislocation today. of ] not know the today know. only because differences indices to I'm we [ those didn't would because with do what than back additional the of the check some ton Today, that those between it but I about all sorry, the then we've volume say, saw the But during just $XXX freight, quarter. on

and So think in the you'll see those do coming fourth online I pretty narrowed if see of back you Australia have are the PLV quarter, strongly quite you out will prices supply drop, substantially.

you real, a be guess right what to might would that volume. on spot now it tell be real So that

Lucas Pipes

appreciate your is Creek that mentioned I you to still is equipment I'll in Dale. And This very try I delays. think -- helpful remarks, Blue much. Okay. prepared question. this color, one squeeze

as effects knock-on can where that? planned. expand on equipment can development you cause the delays two, go doesn't often One, initially then And

things, that that still are situation too cost perspective? into reading lead Is can You from work you that pressures. and monitoring much a to this? cost Or around

Walter Scheller

some equipment made we've we'll it. get times the Even We've we those and we've our for to comfortable X. Actually, Blue enough equipment sure remain in placed vendors with Mines in assure Creek, that we slots advance are we done orders that with Mine lock everything everything for X delays have things of can -- we've ordered. far delivery when those and were need to we out the with the

Operator

now [Operator further to back I this over any will there comments. for Mr. call the questions. no At time, Instructions] are turn Scheller

Walter Scheller

us interest joining your this again That call appreciate Warrior. We concludes afternoon. our for you Thank today. in

Operator

Thank conference. all you that Thank today's you. for participating. And concludes

now disconnect. may You

Warrior Met Coal (HCC) 1 Nov 232023 Q3 Earnings call transcript