Natural Resource Partners Q2 Earnings Dip Y/Y on Weaker Coal, Soda Ash

Core Viewpoint - Natural Resource Partners L.P. (NRP) reported a decline in net income and revenues for Q2 2025, primarily due to weaker coal and soda ash prices, but still managed to generate significant free cash flow [2][8][13] Financial Performance - NRP's net income for Q2 2025 was $34.2 million, a decrease of 25.7% from $46.1 million in the same quarter last year [2] - Total revenues fell 23.6% year over year to $50.1 million, influenced by lower metallurgical and thermal coal prices and reduced soda ash sales prices [2][8] - Diluted earnings per common unit increased to $2.52 from $2.29 in the prior-year quarter [2] - Operating cash flow decreased to $45.6 million from $56.6 million, while free cash flow dropped to $46.3 million from $57.3 million [2] Segment Performance - The Mineral Rights segment, the largest contributor, saw net income decline by $13 million to $39.7 million, with coal royalty revenues per ton averaging $5.17, down from $5.98 a year ago [3] - The Soda Ash segment recorded net income of $2.5 million, down $1.1 million due to lower sales prices amid global oversupply [4] - Corporate and Financing segment improved net income by $2.3 million, aided by lower interest expenses [5] Management Insights - Management emphasized the resilience of free cash flow generation, reporting $46 million for the quarter and $203 million over the last 12 months, attributed to a decade-long deleveraging strategy [6] - Expectations are set to pay off nearly all debt by mid-2026 and to begin increasing unitholder distributions by August 2026 [7][10] Market Conditions - Current market conditions for coal and soda ash remain challenging, with excess supply and low prices expected to persist [11] - Factors contributing to revenue and profit declines include stagnant steel demand, high thermal coal inventories, and reduced soda ash demand due to sluggish construction activity [8] Future Outlook - NRP is on track to eliminate nearly all debt by mid-2026, which would allow for significant increases in distributions starting August 2026 [10] - Management anticipates that metallurgical and thermal coal pricing will remain muted through year-end, with soda ash markets unlikely to recover until supply rationalization occurs [11] Other Developments - NRP declared a second-quarter 2025 cash distribution of 75 cents per common unit, consistent with the first quarter of 2025 [12] - There has been no significant progress in carbon-neutral initiatives during the period, although long-term opportunities are still recognized [12]