Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Alpha Metallurgical Resources Second Quarter 2023 Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded.

I will now turn the conference over to your host, Emily O'Quinn, Senior Vice President, Investor Relations and Communications. begin. may you Emily,

Emily O'Quinn

and everyone. Paul, good you, morning, Thank

results Before during regarding our started, let and anticipated discussed. from you that me remind actual statements prepared forward-looking and performance we differ financial materially those get business contain may remarks, our comments

For XXXX and of earnings the SEC that forward-looking release the to the statements please filing. affect and them, refer regarding Company's more factors information some can second quarter associated

I'll reconciliation of see GAAP those Officer, information Operating the Andy. to non-GAAP and Eidson; Horn, Jason Todd documents are on measures call call measures. to use and participating Financial Dan the Chief our their Chief that, also Officer; Chief Participating our Please Officer. on Executive Alpha's about turn the call and Commercial and over our for Whitehead. are Also President Chief our Munsey, Andy today Officer, with And

Andy Eidson

Thanks, of we Emily, in overcome. everyone. quarter, performance morning, and safely second especially pleased challenging team's our quickly some I'm with and hard to good in circumstances light the worked that

June so detailed Terminal around terminal our Virginia, events at the here. them Mine the Fork Virginia Associates update release XX Our the Road Dominion in in circumstances West press I operational and

each due diligence to But a I will say, challenges of of our was and manner. the team, quick these satisfactory in resolved

normal. this are quarter. to July tons impacted out As delayed and our back the press to issue release we the production this make within third delayed be tons as able expected, in levels the Fork morning DTA shipped expect the by from up stated Road to XX And

the during quite Despite these we produced second quarter. hiccups, well

deal but generally I in trend a the downward of softness coal coming indexes to is recent with In year. terms has volatility followed this volatility experienced that the in of occur. further markets Alpha positioned in indexes last have and highs the well off should months, believe metallurgical the realizations,

coal. across guidance midpoint and as this fully the side, on year committed we this of the at we are volume continue producing portfolio On safely the focusing for efficiently

customers, The looking residual ourselves steel our and current the the come are in are in back United half also and States best in monetary next like. we XXXX. to supplies position the the toward look materials, we Europe with in year For expect pressure weakness in for coupled what all demand, and whatever may on inflationary of considerations year to tightening the way

influencing based safely, we controlling environments. keep As coming several continue us priorities all on the these will output These serve the economic to and geopolitical are well optimizing in market markets plan our customer needs other that producing pricing the on focus months, and over costs. and factors coal our our

seen since to returned buybacks return. roughly which inception pretty months share in $XXX have only capital stockholders investor to we've that return success capital more XX from Turning wish program, through from method to our great with they million But repurchases program program's with base certain the than not buyback the of ago. form the the we've preferred also are our heard unanimity

buyback our occur this our payout, and dividend impact to in be dividend redirection for consolidate now into repurchases, of return the dividend unit fourth targeted coming but with quarter. to dividend growth decided on share We buyback budgeted program. quarterly capital an of are both we million amount will mind, the in goal expected had amount a which exclusive the next $XX declaration program. previously cease that annual will focus the share Board's the from With to efforts following program available The

best market efficient levels for share conditions available believe return Management buyback most the represents is shareholders. repurchase and cash to authorization, execute the flow will our funds program current share the utilizing Board's the billion to on I continue allow. provided $X.X option all that

So going do. that's what we're to

that, our of second turn financial quarter a With results. it discussion for over Todd I'll to

Todd Munsey

Thanks, Andy.

our Met of category. down EBITDA tons average Other of adjusted the million, quarter for from with Quarter-over-quarter $XXX.XX which segment first quarter our in level XXX,XXX realizations the quarter All quarter. decreased $XXX X.X the a for Met first as segment $XXX and came for million. X.X $XXX.XX was to from second quarter, Second compared million the of from realization whole million an We the tons sold

second per from tons on Australian a the while priced and coal per Atlantic $XXX.XX export ton, $XXX.XX more robust ton, mechanisms coal to realized quarter pricing pricing last against the and quarter's indices $XXX.XX. respectively, $XXX.XX Export indices Met of other realizations environment. are ton per compared in priced realized benefited These which

our a $XXX.XX was for the decreased lower of thermal incidental Realizations the coming down Met metallurgical prior in weighted $XXX.XX the compared were per segment second per roughly in thermal at quarter in reflecting QX, total XX% ton. average sales tons quarter's Realization the portion in quarter-over-quarter, against the ton, when the for sold. of pricing ton the period to $XXX.XX QX $XXX.XX per as in

category realizations down in All the from $XXX.XX were Similarly, first Other quarter the second in $XX.XX, quarter.

from increased was pricing the segment quarter. ton quarter. environment $XX.XX as Cost Cost per This our for of in coal. first the the within in per to coal quarter-over-quarter of quarter-over-quarter ton sales the to category per drop in ton, Other per thermal compared to to ton Met $XXX.XX declining decreased All in $XXX.XX $XX.XX sales first down coal due realization

items, the first $XX cost as $XX.X compared is increased due million the All $XX.X decreased million, stock to million to quarter. in of Other the first SG&A, end in with $XX.X category in mine's approaching down from inefficiencies expected to quarter and noncash million second Slabcamp was QX CapEx XXXX. level quarter associated excluding life. the in This compensation nonrecurring

have million mentioned in million lumpiness established $XXX reiterated last has The we guidance the XXXX. our $XXX quarter CapEx previously year of continued, CapEx full spending but to range for we

Moving to balance and sheet cash the flows.

the first million at $XXX.X we quarter. availability June, the at on quarter. unrestricted net had which had as cash, is unused in $XXX.X Alpha our in ABL We quarter. of million in of $XXX.X $XX.X the from end million the XX, repurchases liquidity had end the $XXX the of June share of total As of million up during end XXXX, million of of the

By in comparison, million. first quarter provided was by as the the quarter-over-quarter of compared at end operating $XXX.X liquidity total million million increased Cash QX in $XXX.X to to $XXX.X QX. activities

of $XX.X the As borrowings facility quarter. from of June million no unchanged XX, of outstanding, had credit our ABL prior and letters

guidance Turning to down X.X deferrals, from the million the within we tons. tons, position X now byproduct thermal to the due full segment to to range to million year, X.X prior million million volumes customer committed reduced our for our year coal for of some have X.X Met

committed is priced the of at an XX% through committed midpoint average in of $XXX.XX. price the table, Walking guidance our our Met metallurgical at tonnage of and segment

committed priced, Another of midpoint the which fully are means not of year XX% of the rest yet at tonnage we committed at our is but the guidance. XXXX Met for midpoint the

cash of All dividend Other payable X Board $XX.XX. XX. Alpha's for quarterly an portion this with of fully our a on of become declared XXX% price priced byproduct guidance as at average committed segment the priced thermal will average and share, Met we October of $XX.XX. new of the is holders of record for which and category committed year range $X.XX And per in are midpoint September the The an price of at has

of program to fixed cost over determined year-end return shares at Board a the capital Pursuant million at we buyback in second that of The consolidate the efforts just also cease share repurchase our has the dividend X $XXX quarter program, will XXXX. on to program. the repurchased million

we have count XX% program, shares has weighted outstanding acquire of approximately beginning been roughly by Since common spent the million per price share. $XXX.XX to at a reduced the share the of X.X Alpha's of program time million began. The the roughly from $XXX stock average

approximately As shares of of million. the stock XX, was number common XX.X July XXXX, outstanding

over to details I will turn operations. on for the now some Jason call

Jason Whitehead

Thanks, morning, Good Todd. everyone.

you've of drop take dynamics. months. in numbers in pricing by shifting of down, financial the not to of As to several have severance to sale tend to the is the costs other cost taxes the our but margin and last our in royalties. piece longer We results, decrease realized equation over sales-related proportionate come But coal the corresponding respond seen cost coal

well. is compete companies we for to not inflationary reversal extremely any seen the other The COVID Labor, causing of the with are now area for with pressure. error industry companies, have us an do, conditions talent ourselves where as but we outside of as competing tight example, normally mining labor market we find

workforce working the aggressively our generation. both our team to are talented stars up of and attract and coming the retain We next to

has availability processing note, services equipment within many addition of inflationary higher certain processes also from have building our costs, we've In labor improved, own a benefiting chain. aspects and stickier On seen and parts positive and -- pressure been we parts continue of their our supply -- in-house. to

continues up remain on annual we and vendors products services. to as can. and are mitigating for We Pricing their more contracts cost degrees for climb that supplies these and to focused come for materials the pressures charging renewal

ops XX, Bandmill plant, challenges which Kepler our in issues Fork Looking processing feeds Group. within at portfolio, Road geologic the the to addition the we at some experienced

the Kepler the third the flexing we production early resiliency Alpha in these our other locations resolved continue were to and enterprise. demonstrate improved within problems quarter. have issues at Despite Bandmill The by interruptions,

and excavators continuous underground large includes loaders XX and Our active surface six miners. mining production which highwall fleets, miners, XX or

give capabilities a competitive of us eggs I via optimize and believe hard in piece of well. each that organization operational putting to edge many Alpha basket, too work we to our serve breadth not one the

our been As completion. has in we last mine, nearing have coal previous about calls, remaining spoken Slabcamp, thermal

date and when a XXXX, set idle. August operation have mine We will of XX, out this

supports instrumental Mammoth Slabcamp The preparation the been workforce and in Slabcamp have its success. that plant at

new and on Mine, up, transition these excited June virtually making Deep the ready cuts its employees this on are is to our timing We developmental transition Thunder X first seamless. over to which to took Rolling staff

will coal mining at While quite this metallurgical to for some Alpha a compete year's of our the talked about it's end something pure-play month, time, transition company. Slabcamp out long we've

and We hard nearly occasion. accomplishment implementation from planning this this our look to forward employees. work the and all marking and of proud I'm X,XXX

turn Dan will additional the over the some I coal for information to on markets. call

Dan Horn

economies Thanks, to coal to soften find footing. good and to attempt economic geopolitical globe everyone. morning, Due several metallurgical the stable Jason, across have markets and as factors, continued

and data and instead Europe. the manufacturing world expanding. Russian indicators States in As Ukraine are that Economic the like inflationary monetary regions of the production of continues remain war many still indicate United the of tightening impacts in contracting persists,

fueling and Policy largest The a China's the of recovery significant its second reopening world's decline, from possible has index price following China's muted. And its multi-month COVID economic in concerns steel. instead economy deflation of been continued expected producer Zero and growth consumer weakness June

demand influencing indices. the in are steel factors metallurgical these All

Each of quarter, or continue During four the quarter. course coal the or downward second over XX% indices of volatility quarters. off the by experienced they decreased more as second market recent monitors overall the trajectory closely the of indices

of ton of $XXX beginning Australian low-vol $XXX index at index start $XXX The The per June. XX. quarter. Coast from The $XXX decreased the premium June U.S. at $XXX metric metric the of the index on to to April ton quarter A U.S. at decreased from at the of East from dropped quarter ton start end East Coast second per low-vol end metric per the to the of at $XXX high-vol the the

ton East per Coast U.S. ton on metric decreased index metric XX. from per the finally, $XXX June April to high-vol X on $XXX And B

low-vol, B from quarter further per of yesterday. respectively, high-vol high-vol the softened three measuring indices as Coast slightly levels the close, and the U.S. with and A their $XXX, East $XXX $XXX ton, indices June XX Following

its low-vol The The with date. same close trend quarter its however, downward thermal metric market $XXX level Australian from on ton index, has increased per continued has also the premium to XX. more intervals metric April at ton metallurgical of The dropping June $XXX.XX per as APIX fell index to in pricing ton $XXX significant than metric markets. X from the on per

report show as quarter levels from the the second APIX its recent dropping August with most of $XXX.XX at index the X. In close

downtime and to lending the a failure caused in machines, due days' announced vessel in we tons three stacker mechanical on which delays. one Newport late impacted June, of shipments Alpha worth approximately DTA, As of XXX,XXX News experienced roughly reclaimer Associates, Dominion of Terminal

July previously once These June, made back of were tons was to stacker up into ship but they month reclaimer of repaired in in and expected operation. month the the were the came

is successfully outage, annual throughput planned levels maintenance, July. just which and terms their of Everything occurred normal operating completed early In dumper in back to well. DTA

we Transportation port, to getting rail issues of we But our challenged pleased to the around quarter. terms our some has other be with DTA, to at those In our locations work partners. with has times the which been with coal in some touch remained to are in from of success throughout continuing staying continue more positive transportation and recent to and performance months.

the XXXX volumes of them for look as forward days next we coming and we where dialogue sold look discussions year, our be months ahead our with about coal Finally, contracts domestic to year. and in We in customers early productive weeks to the the ahead. are will a with

operator, the with now And that, ready are open we call questions. for to

Operator

question from Our Riley question. is Securities. first Please with Instructions] proceed Pipes B. [Operator with Lucas your

Lucas Pipes

good Congrats on quarter Thunder bit got a very also a Rolling and that little just louder.

the job multiple a markets first So want to great for I bit. a across Then little to fronts. turn

across signs kind assessment? of soft gave to of and where hone a us a what's globe here? good just little where and You still are is be headwind? it seaborne -- stiffer first, through the regions are in But the may maybe Or I you it market your could different strengthening would walk little summary. dynamics a seeing on Is you Asia? the seeing you if opportunities the appreciate in market

Dan Horn

we've Lucas, buyers seen of in which is unusual. some a on of desks year their is then lot Basin. from I bit speaking, holiday. seen disappear the that I'll probably Atlantic And we've summer in and not guess, a lull of markets, this the go say Dan. this A broadly certainly

have take. been all ones pretty Asia into selective we opportunities on think year. I We're there which

in into pleased a there, contract Atlantic low -- case, of year Basin us particularly think has kind say having our pretty from in Alpha's think I that I'll and spot in Asia in There's just the also opportunities those the this lower-priced to of kept pricing I participate but position we're that opportunities. lot

continue that have that we So, XXXX those play markets. we're some in -- will won't we think I lower think through of to

Lucas Pipes

is helpful. That

there the market? you may flexibility to you it? market could flexibility you the you could you how some the much commented considerations. might the shift have depending think if transportation on there, negotiations typically negotiations. more domestic I coal up, the the into what us how wondered appreciate domestic be walk through of us But into side? I might And if how met shape You assume kind on And seaborne remind on would sell about of is

Dan Horn

mean Yes, between X time. historical we'll you I've Lucas, a could be tons see into in and doing long look domestic really been into at our this what number. well, X place look can It I wait want million guess numbers. There's And a typical that could somewhere no our those and I the markets. year opportunities market. and we customers at the million

So I for don't have a typical you. number

years, the and on steel the furnace as of production the strength industry that well. in U.S. the in depends coke And some blast and it dictates

do So and that. as flexing -- certainly tons, as can the far we

a sense. could lot We as to made move have and the of we opportunity ability know, the seaborne, that ton you if increase

Lucas Pipes

Very helpful, Dan.

level? of X million level typically million the kind to So X what historically, the taken has versus you

Dan Horn

I say, as North holding historically I a -- less would well. this is the those the in American North years let's industry running U.S. But steel hot the that North pricing position, American year. guess, production, less metal. where Steel is pretty The said, be necessarily well. in don't industry pretty -- I up Well, American coke weaker see would be

Lucas Pipes

of kind if where side to the also to from turn be I And for perspectives it. might to cost pressures ask and where all cost quickly, your you that. wanted really inflationary any, side? seeing, still easing over the on Thank appreciate you're things

Jason Whitehead

cost and the Really, cost pressure or really, the Jason. it's to with steel board. other that like is indexes continues or that, linked those supplies repairs, are the something it's on fuel across than front This --

labor. side. -- this on fix of lot it's contract, And of we saying, very competitive this. coming to rest people hard annual labor work contracts these as skilled got to and renewal the very It's It's coming to been underwater find for the we've A are lot and of a time up year. are look, we've the throughout

speculate through more more there we're So, not second And you that that across your far area board. of question? contract XXXX. can halfway -- there's really renewals a than was I pinpoint. as But or would it's for the one as it less It's part

Lucas Pipes

think on I where kind you're any cost seeing of of side? -- pressures there It you on was was any easing. Is It touched most it. relief

Jason Whitehead

supply so Well, of has guess, the chain constraints, the I availability improved. parts components that and

we So see you side, other seen some be but would that the just on yet. expect there'd you'd lag where improvement haven't

Andy Eidson

is Andy, some suppliers mean all I the market. of all as could and throw I same extremely the cascading this I've are these impacts in comment an labor -- their this one And that. Yes. with ours. our Lucas, more issues if broader of spoken is are on tight

to run wages, instances, paying employee be higher staff get So wages. some as rates, pools. In their regular to similar they may try paying up higher we're they're to back over we competing

And to so it all seems just to a very constricted market. down labor boil

Lucas Pipes

internships is increased I maybe great great really, guess investor you interest, the or really up should But very for Keep offer professionals that. that. with aside the look like work, something job. I'll finance That helpful.

Andy Eidson

Thank Appreciate you, Lucas. you.

Operator

Our question. Please with is Benchmark Nathan Martin proceed next your question Company. The from with

Nathan Martin

Coast China $XX CFR price I'm domestic But driven also China. start up up Dan net marketing price the indices as lower. price start price little here kind going bit well, a again, touched in the is have seen, so on moving keep East we about well, busy here. there creeping or increased on likely by as U.S. side of the to We've third quarter to

indices? U.S. great it on Dan, at spread especially to there, dynamics get of maybe play would widening be the versus thoughts your So Aussie that

Dan Horn

and I'll And I to attribute that guess some supply demand. of

Asia in Atlantic the the is there's demand it in -- than is think at the moment. I stronger

of know, a you as benefits of the demand saw So using And that Asia pricing. on coal in we index. you're Aussie seeing of bit some the quite that

to -- that. that's So pleased we're see

On supply, coming increased of XXXX West some high-vol into supply the indices, U.S. some the there's some new East probably Coast here Virginia. mines in in that market Northern

to So might that's bit. out But be how there's contributing that supply there view a kind spread little some additional that I of it.

Nathan Martin

Got Dan. the guys at that to midpoint would And segment. XXX% it. you for mentioned committed related now then helpful, the within I Met you're 'XX somewhat, say That's

of ton you're really Alpha the be maybe into in get it'd some for maybe year? the of insight and how some half Alpha's So export index pricing between other about helpful mechanisms mix back to this thinking the

Dan Horn

breakdown see good of broadly speaking, you tables shipments vessels, that is you this the breakdown the going mean, we we rest and forward. probably I is that barometer some But will similar changes. think our a in the come year, probably that what be to for I some expect will There Nate. quarter the go. gave

Nathan Martin

The on… the breakdown exports between

Dan Horn

Yes, there detailed pretty we a that breaks have on. table out

Nathan Martin

or XX% Got it. XX% to or so think, to X/X Yes. roughly XX about I balance mechanisms other so, of domestic. It's with there, the --

maybe helpful. thoughts. Okay. the also had Good. those of production year, to you some of high-vol That's just we've the likely here appreciate in some coming I but coming offline mentioned U.S. the end domestic towards And market, online shifting then the supply kind

been it there's of think well. some operational, I Some as idling

supply the any get is And be would specifically think tightness idlings? more? you Just Or but to expect color. needs great your it there U.S.? you would in to guys, helpful be on any some great more do assuming be to would So to then you demand get here thoughts

Dan Horn

unpack I'll say buys the the domestic the on what to really of of I say don't typically to the coals on market that the market, that domestic to higher are spectrum. lot types other is, touch than guess end there. There's a that want quality I

market that to of might the And apply to market. apply issues some the necessarily seaboard so, the don't domestic supply/demand

that the a I on take all find to a the But fairly think find I across move it they home market. seaborne the market will and don't down the lot the it in just it that tight, say domestic of demand globe, the to are I coals coming And -- a think still think market, home. home event would or up supply/demand find a is one little -- takes a bit. make I in If doesn't they'll

Nathan Martin

appreciate I it. Got that.

that's I guys. have think all I left

appreciate really I in So, luck half. the the and second time of best

Andy Eidson

Thanks, Nate.

Operator

Navarre proceed & question. Jonnathan from Cowen with is question Please with Company. next Our your

Jonnathan Navarrete

been I pretty think right markets well covered now. much have

for one me, and is So dividend. only to the that relating

would would in would a let's again let's dividend? So And occur give the say dividend share future? what method Or to pricing considered the -- you to be the need skyrocket, -- say, let's capital of medical for preferred the scenario, repurchases reinstate remain return?

Andy Eidson

Jonnathan, valuation we're away pretty values going If do has the strictly then company. that we But seems might to consider it is believe ways appropriate, that. our we with it the long from like market how direction.

prices back to in market -- as coal we saw catch company everywhere last and and $XXX didn't ton in a So seen years, between, up. spike in two and valuations the $XXX we've market --

get us, So this I to to consider to value going some program. pure share buyback think it's we're until the to the very appropriately content there stay determines and market then program and adaptation we'll

Operator

you. Thank

Lucas from your question. is with B. with question Riley Please Securities. proceed next Our Pipes

Lucas Pipes

Thank all for operator. Thank much question. you more you one enduring very

tax the extensive there's from media And coverage in Valley being in steelmakers Japan, a there's separating efforts India, talk coal world, potentially interested. up the of assets. of around Elk the lot So, of

is met in just interesting very one so, terms coal of strategically how important. And

your so with on integration -- interest but you a -- are you that? you that level world, color any of you around in also it's engage sense And be steelmakers I there's my color side, you question would as interesting. would a are the higher the appreciate to could know sensing having vertical is, kind provide on question,

Andy Eidson

ever world, discussions been lot back or of integration. a heat, the around set data of want monitoring A there's over But waves Yes, really huge to lot limited, myself guesstimates. years here. I don't nothing strictly sample in -- a are these size has so happened, and nothing vertical the that I've past declare But reader a is XX of activity not been M&A here, mind material. closely Lucas, and my so

blood until big think weak perhaps of the it the and world. happens, little one stirred imagine gets of But that this up begin. things So, a people smell water bit get market current kind to these when hard a discussions in in I it's

I know anyone some executing of it will get know are a lot just actually there something but sense, on don't don't to that. makes point like So, I of where when instances the

Operator

at are any There the further no you. to Eidson questions this I floor like to time. Thank would turn over closing remarks. for Andy back

Andy Eidson

thanks your you Well, everyone, great and in and we have for your of appreciate again, We dialing in. time great rest Alpha, a hope a weekend. interest the day and

Operator

This concludes today's conference.

your disconnect your may time. for you You participation. Thank lines at this

Alpha Metallurgical Resources (AMR) 4 Aug 232023 Q2 Earnings call transcript