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NACCO Industries(NC) - 2025 Q2 - Quarterly Results
NACCO IndustriesNACCO Industries(US:NC)2025-08-25 10:33

Executive Summary Company Announcement & CEO Statement NACCO Industries announced its consolidated results for Q2 2025, acknowledging short-term operational challenges that temporarily impacted expectations for increasing operating results. Despite these setbacks, the CEO expressed confidence in the businesses' positioning for meaningful future growth - NACCO Industries experienced short-term operational challenges in Q2 2025, leading to a temporary setback in expected operating results2 - The CEO, J.C. Butler, remains confident in the businesses and their potential for meaningful growth, despite the Q2 results being compared against a strong prior-year period2 Summary Financial Results For Q2 2025, NACCO reported a 30% increase in revenues to $68.2 million, but operating profit turned into a loss of $(51) thousand, down significantly from $7.4 million in Q2 2024. Net income decreased to $3.3 million from $6.0 million, and diluted EPS fell to $0.44 from $0.81. Consolidated EBITDA also declined to $9.3 million from $13.5 million | ($ in thousands, except per share amounts) | 6/30/2025 | 6/30/2024 | Fav/(Unfav) $ Change | | :--- | :--- | :--- | :--- | | Revenues | $68,235 | $52,345 | $15,890 | | Operating profit (loss) | $(51) | $7,366 | $(7,417) | | Other (income) expense, net | $(2,045) | $1,138 | $3,183 | | Income tax (benefit) provision | $(1,266) | $256 | $1,522 | | Net Income | $3,260 | $5,972 | $(2,712) | | Diluted EPS | $0.44 | $0.81 | $(0.37) | | Consolidated EBITDA* | $9,259 | $13,508 | $(4,249) | Consolidated Second Quarter 2025 Performance Overview Despite strong revenue growth of 30% to $68.2 million, NACCO's Q2 2025 operating results were near break-even due to short-term operational disruptions in both Utility Coal and Contract Mining segments and higher unallocated costs. These disruptions included unfavorable pricing, mining inefficiencies, unexpected repairs, and quarry delays. Increased other income and lower tax expense partially mitigated the decline in net income and diluted EPS - Revenues increased 30% over Q2 2024, reaching $68.2 million4 - Short-term operational disruptions in Utility Coal and Contract Mining segments, along with higher unallocated costs, led to break-even operating results4 - Net income decreased to $3.3 million (from $6.0 million in Q2 2024) and Diluted EPS to $0.44 (from $0.81 in Q2 2024), partly offset by increased other income and lower tax expense45 Liquidity As of June 30, 2025, NACCO Industries maintained total liquidity of $139.9 million, comprising $49.4 million in cash and $90.5 million available under its revolving credit facility. The company had $95.5 million in total debt outstanding and paid $1.9 million in dividends during Q2 2025. A $7.8 million balance remains on its $20 million share repurchase program expiring at year-end | Metric | Amount (as of June 30, 2025) | | :--- | :--- | | Total debt outstanding | $95.5 million | | Total liquidity | $139.9 million | | Cash | $49.4 million | | Availability under revolving credit facility | $90.5 million | | Dividends paid in Q2 2025 | $1.9 million | | Remaining share repurchase program | $7.8 million (out of $20 million, expires end of 2025) | Detailed Segment Performance Analysis Segment Name Changes NACCO Industries changed its reportable segment names in Q2 2025 to better align business activities with segment identities. The former Coal Mining, North American Mining, and Minerals Management segments are now Utility Coal Mining, Contract Mining, and Minerals and Royalties, respectively, with no change to their composition or historical reporting - Reportable segment names were changed in Q2 2025 for clearer association of business activities8 - New segment names: Utility Coal Mining (formerly Coal Mining), Contract Mining (formerly North American Mining), and Minerals and Royalties (formerly Minerals Management)8 Utility Coal Mining Results The Utility Coal Mining segment saw revenues increase 91% to $28.6 million in Q2 2025, primarily due to higher tons delivered at Mississippi Lignite Mining Company, which had been constrained in the prior year. However, operating profit decreased to $1.2 million from $2.8 million, and Segment Adjusted EBITDA fell to $3.4 million from $5.7 million, mainly due to lower operating results at Mississippi Lignite, increased operating expenses (employee-related costs), and a modest decrease in earnings from unconsolidated operations | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Revenues | $28,626 | $14,996 | | Earnings of unconsolidated operations | $11,656 | $12,006 | | Operating expenses | $8,733 | $8,097 | | Operating profit | $1,222 | $2,767 | | Segment Adjusted EBITDA | $3,354 | $5,663 | - Q2 2025 revenues rose 91% due to increased tons delivered at Mississippi Lignite Mining Company, which was previously constrained by power plant operations10 - Operating profit and Segment Adjusted EBITDA decreased year-over-year due to lower operating results at Mississippi Lignite, increased employee-related costs, and a modest decrease in earnings from unconsolidated operations11 - Mining inefficiencies at Mississippi Lignite, coupled with a decreased contractual sales price per ton and the realization of elevated inventory costs from prior periods, contributed to the decline1213 Contract Mining Results The Contract Mining segment's revenues increased to $30.7 million in Q2 2025, primarily driven by higher reimbursed costs and a 3% growth in revenues net of reimbursed costs, mainly from parts sales. However, operating profit decreased to $1.0 million from $3.1 million, and Segment Adjusted EBITDA fell to $3.9 million from $5.5 million. This decline was attributed to lower mined tons delivered due to reduced customer requirements and operational delays, higher operating costs including unexpected equipment repairs, and increased employee-related costs, which offset the profits from increased parts sales | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Tons delivered | 13,947 | 16,000 | | Revenues | $30,723 | $27,920 | | Operating profit | $1,010 | $3,085 | | Segment Adjusted EBITDA | $3,927 | $5,519 | - Revenues rose due to increased reimbursed costs and a 3% growth in revenues net of reimbursed costs, mainly from parts sales16 - Operating profit and Segment Adjusted EBITDA decreased due to lower mined tons delivered, higher operating costs (including unexpected equipment repairs and maintenance), and increased employee-related costs17 Minerals and Royalties Results The Minerals and Royalties segment reported revenues of $7.3 million in Q2 2025, up from $5.6 million in Q2 2024. Operating profit decreased to $5.2 million from $7.6 million, and Segment Adjusted EBITDA fell to $6.1 million from $8.9 million. Excluding a $4.5 million gain on land sale in Q2 2024, both operating profit and Segment Adjusted EBITDA increased year-over-year, primarily driven by a 30% increase in revenues due to higher natural gas prices | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Revenues | $7,268 | $5,593 | | Operating profit | $5,205 | $7,591 | | Segment Adjusted EBITDA | $6,050 | $8,914 | - Prior-year Q2 2024 operating profit and Segment Adjusted EBITDA included a $4.5 million gain on sale of land19 - Excluding the land sale gain, 2025 operating profit and Segment Adjusted EBITDA increased year-over-year, driven by a 30% revenue increase primarily from higher natural gas prices19 Outlook Overall Business Strategy & Macroeconomic Trends NACCO Industries positions itself as a diversified natural resource company focused on consistent financial returns, operating exclusively in the U.S. and providing critical inputs for electricity, construction, and industrial minerals. Favorable macroeconomic trends, including increasing electricity demand, on-shoring, and federal policies, are expected to drive longer-term growth. The company emphasizes disciplined capital allocation, operational expertise, and a cautious, entrepreneurial approach to capture growth opportunities, aiming for compounding returns and expanding investor value - NACCO is a diversified natural resource company operating exclusively in the U.S., providing critical inputs for electricity generation, construction, and industrial minerals21 - Favorable macroeconomic trends (increasing electricity demand, on-shoring, federal policies) are creating growth opportunities21 - The company's strategy involves disciplined capital allocation, operational expertise, and an entrepreneurial yet cautious approach to growth, aiming for compounding returns and long-term investor value22 Financial Expectations (H2 2025, Full Year 2025, 2026) NACCO anticipates a substantial increase in consolidated operating profit in H2 2025 compared to H1, with momentum building into 2026. However, full-year 2025 results are expected to be lower than the prior year, partly due to a $13.6 million business interruption insurance income recognized in Q3 2024. The planned termination of its defined benefit pension plan in Q4 2025 is expected to result in a significant non-cash settlement charge, leading to a substantial year-over-year decrease in net income and EBITDA for H2 and full-year 2025 - Anticipates a substantial increase in consolidated operating profit in H2 2025 compared to H1, with momentum into 20262324 - Full-year 2025 results are expected to be lower than prior year, partly due to $13.6 million business interruption insurance income in Q3 202424 - Planned termination of defined benefit pension plan in Q4 2025 is expected to result in a significant non-cash settlement charge, leading to a substantial year-over-year decrease in net income and EBITDA for H2 and full-year 202524 Segment-Specific Outlook Utility Coal Mining Outlook The Utility Coal Mining segment expects steady customer demand at unconsolidated operations in H2 2025 and 2026. Mississippi Lignite Mining Company's H2 2025 results are projected to improve over H1, but a reduction in the 2025 contractual per-ton sales price compared to 2024 will likely offset cost efficiency improvements, leading to a decline in H2 and full-year 2025 results from prior-year levels. Profitability is expected to improve in 2026, driven by stable earnings from unconsolidated operations and anticipated improvements at Mississippi Lignite in sales price and cost per ton, especially with more consistent power plant operations - Customer demand at unconsolidated mining operations is anticipated to remain steady in H2 2025 and throughout 202625 - Mississippi Lignite Mining Company's H2 2025 results are expected to improve over H1 2025, but a lower contractual sales price per ton in 2025 compared to 2024 will likely cause H2 and full-year results to decline from prior-year levels25 - Improving profitability is expected for this segment in 2026, driven by stable earnings from unconsolidated operations and anticipated improvements at Mississippi Lignite in both sales price and cost per ton25 Contract Mining Outlook The Contract Mining segment is positioned as a growth platform, benefiting from geographic and mineral expansion and new long-term contracts, which are expected to create a compounding effect on cash flows. For example, three new/amended contracts in 2024 are projected to generate $20 million in after-tax net present value cash flows over 6-20 years. Sawtooth Mining, a subsidiary, is the exclusive provider for the Thacker Pass lithium project, expected to contribute stable income during construction and enhanced income upon lithium production (Phase 1 estimated late 2027). Near-term profitability improvements in H2 2025 and full year are expected from operational efficiencies and increased parts sales, continuing into 2026 - Contract Mining is a growth platform, benefiting from geographic/mineral expansion and new long-term contracts, creating a compounding effect on cash flows25 - In 2024, three new/amended contracts are projected to generate approximately $20 million in after-tax net present value cash flows over 6 to 20 years25 - Sawtooth Mining is the exclusive provider for the Thacker Pass lithium project, expected to provide stable income during construction and enhanced income upon lithium production (Phase 1 estimated late 2027)2526 - Near-term profitability improvements in H2 2025 and full year are expected from operational efficiencies and increased parts sales, continuing into 202626 Minerals and Royalties Outlook The Minerals and Royalties segment, led by Catapult Minerals Partners, has built a diversified portfolio of oil and gas mineral and royalty interests in the U.S., leveraging a data-driven approach for portfolio expansion. In July 2025, Catapult acquired $4.2 million in mineral interests in the Midland Basin, including producing wells and future development opportunities. These investments, along with existing non-operated working interests, are expected to contribute to improved operating profit in H2 2025 compared to both H1 2025 and H2 2024, with improvements continuing into 2026 - Catapult Minerals Partners has a high-quality, diversified portfolio of oil and gas mineral and royalty interests in the U.S., with a data-driven approach to expansion27 - In July 2025, Catapult completed a $4.2 million acquisition of mineral interests in the Midland Basin, including 10,500 gross acres and approximately 400 net royalty acres28 - These investments are expected to contribute to anticipated improvements in H2 2025 operating profit compared to H1 2025 and H2 2024, continuing into 202628 Mitigation Resources of North America Outlook Mitigation Resources of North America, which provides stream and wetland mitigation solutions and reclamation services, is expected to achieve key profitability milestones in 2026. While its performance is currently variable due to permit and project timing, the business aims for more consistent results over time as new projects are added - Mitigation Resources of North America provides stream and wetland mitigation solutions and reclamation/restoration construction services29 - The business, currently variable in performance due to permit and project timing, is expected to achieve key profitability milestones in 2026 and move toward more consistent results29 Capital Allocation & Long-Term Value Creation NACCO plans capital expenditures of up to $86 million in 2025, primarily for future business development, reflecting a prudent reinvestment strategy for long-term value. The company projects substantially lower cash use for full-year 2025 compared to 2024, anticipating a steady increase in annual cash flow generation starting in 2026 as returns from prior investments are harvested. The long-term strategy focuses on a strong capital structure, operating discipline, compounding long-term contracts, and deliberate growth investments to deliver annuity-like returns and increasing cash flows to stockholders through reinvestment, share repurchases, and dividends - Anticipates capital expenditures of up to $86 million in 2025, with the majority earmarked for future business development29 - Projects substantially lower use of cash for full-year 2025 compared with 2024, with a steady increase in annual cash flow generation beginning in 202629 - Long-term strategy emphasizes a strong capital structure, operating discipline, compounding long-term contracts, and deliberate growth investments to deliver annuity-like returns and increasing cash flows to stockholders30 Additional Information Conference Call Details NACCO Industries will host a conference call on Thursday, August 7, 2025, at 8:30 a.m. Eastern Time to discuss the Q2 2025 results. Participants can access the call via phone or webcast through the company's investor relations website. A replay and webcast archive will be available after the call - Conference call to discuss results scheduled for Thursday, August 7, 2025, at 8:30 a.m. Eastern Time31 - Access available via phone (888-880-3330 / 646-357-8766, Conference ID: 6790172) or webcast at ir.nacco.com/overview31 Non-GAAP and Other Measures This release includes non-GAAP financial measures, specifically EBITDA and Segment Adjusted EBITDA, which are reconciled to the most directly comparable GAAP measures. Management provides these as supplemental disclosures to help investors understand operating results and uses them for internal evaluation - The release contains non-GAAP financial measures (EBITDA and Segment Adjusted EBITDA) reconciled to GAAP measures33 - These non-GAAP measures are provided as supplemental disclosures to assist investors and are used by management for evaluating results33 Forward-looking Statements Disclaimer The news release contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially. Readers are cautioned against undue reliance on these statements, which are valid only as of the release date. The company disclaims any obligation to publicly revise these statements. Key risk factors include changes in customer demand, weather, contract changes, hydrocarbon prices, development plans, regulatory actions, supply chain disruptions, and operational costs - Statements in the release that are not historical facts are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially34 - Readers are cautioned not to place undue reliance on these statements, which speak only as of the date of the release, and the Company undertakes no obligation to revise them34 - Factors that could cause differences include changes in customer demand, weather, contract changes, hydrocarbon prices, regulatory actions, supply chain disruptions, and operational costs3435 About NACCO Industries NACCO Industries is a company that brings natural resources to life by delivering aggregates, minerals, reliable fuels, and environmental solutions through its NACCO Natural Resources businesses. More information is available on their corporate and investor relations websites - NACCO Industries delivers aggregates, minerals, reliable fuels, and environmental solutions through its NACCO Natural Resources businesses36 Financial Statements and Reconciliations Unaudited Condensed Consolidated Statements of Operations The unaudited condensed consolidated statements of operations provide detailed financial performance for the three and six months ended June 30, 2025, and 2024. Key figures include revenues, cost of sales, gross profit, earnings of unconsolidated operations, operating expenses, operating profit (loss), other income/expense, income before tax, income tax, and net income, along with basic and diluted EPS | | THREE MONTHS ENDED | | SIX MONTHS ENDED | | :--- | :--- | :--- | :--- | | | JUNE 30 2025 | JUNE 30 2024 | JUNE 30 2025 | JUNE 30 2024 | | Revenues | $68,235 | $52,345 | $133,806 | $105,634 | | Cost of sales | 61,415 | 45,327 | 117,332 | 91,598 | | Gross profit | 6,820 | 7,018 | 16,474 | 14,036 | | Earnings of unconsolidated operations | 13,138 | 13,592 | 29,124 | 26,899 | | Operating expenses | 20,009 | 13,244 | 37,967 | 28,812 | | Operating (loss) profit | (51) | 7,366 | 7,631 | 12,123 | | Other (income) expense | (2,045) | 1,138 | 510 | 322 | | Income before income tax (benefit) provision | 1,994 | 6,228 | 7,121 | 11,801 | | Income tax (benefit) provision | (1,266) | 256 | (1,039) | 1,259 | | Net income | $3,260 | $5,972 | $8,160 | $10,542 | | Diluted earnings per share | $0.44 | $0.81 | $1.10 | $1.42 | Consolidated EBITDA Reconciliation The consolidated EBITDA reconciliation provides a non-GAAP measure, defining EBITDA as net income before income taxes, net interest expense, and depreciation, depletion, and amortization expense. For Q2 2025, consolidated EBITDA was $9.3 million, down from $13.5 million in Q2 2024. For the six months ended June 30, 2025, it was $22.1 million, compared to $24.8 million in the prior year | | THREE MONTHS ENDED | | SIX MONTHS ENDED | | :--- | :--- | :--- | :--- | | | JUNE 30 2025 | JUNE 30 2024 | JUNE 30 2025 | JUNE 30 2024 | | Net income | $3,260 | $5,972 | $8,160 | $10,542 | | Income tax (benefit) provision | (1,266) | 256 | (1,039) | 1,259 | | Interest expense | 1,944 | 1,311 | 3,718 | 2,422 | | Interest income | (770) | (1,038) | (1,635) | (2,165) | | Depreciation, depletion and amortization expense | 6,091 | 7,007 | 12,884 | 12,699 | | Consolidated EBITDA* | $9,259 | $13,508 | $22,088 | $24,757 | - Consolidated EBITDA is defined as net income before income taxes, net interest expense, and depreciation, depletion, and amortization expense38 Financial Segment Highlights and Segment Adjusted EBITDA Reconciliations (Three Months Ended June 30) This section provides detailed financial highlights and Segment Adjusted EBITDA reconciliations for each reportable segment (Utility Coal Mining, Contract Mining, Minerals and Royalties) for the three months ended June 30, 2025, and 2024. Segment Adjusted EBITDA, a non-GAAP measure, is defined as operating profit (loss) before depreciation, depletion, and amortization expense, offering insight into segment-specific operational performance | | Utility Coal Mining | Contract Mining | Minerals and Royalties | Unallocated Items | Eliminations | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Q2 2025 (in thousands) | | | | | | | | Revenues | $28,626 | $30,723 | $7,268 | $2,223 | $(605) | $68,235 | | Operating (loss) profit | $1,222 | $1,010 | $5,205 | $(7,491) | $3 | $(51) | | Depreciation, depletion and amortization | 2,132 | 2,917 | 845 | 197 | — | 6,091 | | Segment Adjusted EBITDA | $3,354 | $3,927 | $6,050 | $(7,294) | $3 | $6,040 | | Q2 2024 (in thousands) | | | | | | | | Revenues | $14,996 | $27,920 | $5,593 | $4,566 | $(730) | $52,345 | | Operating profit (loss) | $2,767 | $3,085 | $7,591 | $(6,080) | $3 | $7,366 | | Depreciation, depletion and amortization | 2,896 | 2,434 | 1,323 | 354 | — | 7,007 | | Segment Adjusted EBITDA | $5,663 | $5,519 | $8,914 | $(5,726) | $3 | $14,373 | - Segment Adjusted EBITDA is a non-GAAP measure defined as operating profit (loss) before depreciation, depletion, and amortization expense40 Financial Segment Highlights and Segment Adjusted EBITDA Reconciliations (Six Months Ended June 30) This section presents financial highlights and Segment Adjusted EBITDA reconciliations for each reportable segment for the six months ended June 30, 2025, and 2024. It provides a half-year view of segment performance, detailing revenues, operating profit (loss), and Segment Adjusted EBITDA, which is a non-GAAP measure used to assess operational results before non-cash charges | | Utility Coal Mining | Contract Mining | Minerals and Royalties | Unallocated Items | Eliminations | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 6 Months 2025 (in thousands) | | | | | | | | Revenues | $47,865 | $62,249 | $18,170 | $6,623 | $(1,101) | $133,806 | | Operating profit (loss) | $5,013 | $2,980 | $13,112 | $(13,493) | $19 | $7,631 | | Depreciation, depletion and amortization | 4,150 | 5,619 | 2,753 | 362 | — | 12,884 | | Segment Adjusted EBITDA | $9,163 | $8,599 | $15,865 | $(13,131) | $19 | $20,515 | | 6 Months 2024 (in thousands) | | | | | | | | Revenues | $30,541 | $52,403 | $15,994 | $7,828 | $(1,132) | $105,634 | | Operating profit (loss) | $2,350 | $5,440 | $15,521 | $(11,208) | $20 | $12,123 | | Depreciation, depletion and amortization | 5,110 | 4,690 | 2,316 | 583 | — | 12,699 | | Segment Adjusted EBITDA | $7,460 | $10,130 | $17,837 | $(10,625) | $20 | $24,822 | - Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures42