NACCO Industries (NYSE:NC) Q3 2025 Earnings Call November 06, 2025 08:30 AM ET Speaker3Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the NACCO Industries third quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, press star one on your telephone keypad. To withdraw your ...

Financial Data and Key Metrics Changes - Consolidated revenues increased to $68 million, up 30% year over year, primarily driven by the utility coal mining segment [15] - Consolidated net income decreased to $3.3 million from $6 million in the prior year, with diluted earnings per share down 46% year on year [16] - EBITDA was reported at $9.3 million compared to $13.5 million in the same period last year [16] Business Line Data and Key Metrics Changes - Utility Coal Mining segment faced operational disruptions, leading to a decline in operating profit and segment adjusted EBITDA, primarily due to challenges at Mississippi Lignite Mining Company [16][18] - North American Mining revenues net of reimbursed costs rose 3%, driven by increased parts sales, but were offset by fewer tons delivered and higher operating costs [18] - Minerals and Royalties segment saw a 30% rise in revenues, largely due to higher natural gas prices, with operating profit and EBITDA increasing when excluding last year's one-time gain [18][19] Market Data and Key Metrics Changes - The utility coal mining segment's challenges were linked to customer inefficiencies at power plants, affecting coal mining operations [8] - The contract mining segment experienced fewer trends delivered due to temporary mechanical issues, but parts sales helped offset some losses [9] - The company anticipates stronger results in the latter half of the year as new contracts and parts sales contribute positively [9] Company Strategy and Development Direction - The company is focused on long-term contracts and investments that produce steady earnings and cash flows, aiming for a compounding growth model [12][13] - New segment names were introduced to enhance communication with stakeholders, reflecting a strategic effort to clarify business activities [5][14] - The company is optimistic about future growth, particularly in the contract mining segment, and is actively pursuing new long-term projects [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate temporary challenges and expects improving results in the second half of the year [7][22] - The operational discipline and focus on long-term returns for shareholders remain a priority, with optimism about prospects for 2026 and beyond [22] - Management acknowledged the favorable environment for energy demand and government support, which is expected to benefit all business segments [22] Other Important Information - The company plans to terminate its pension plan by the end of the year, which will trigger a non-cash settlement charge but simplify its financial structure [20] - Total debt outstanding as of June 30 was $95.5 million, with total liquidity at $139.9 million [20] - The company is forecasting up to $86 million in capital spending for the year, primarily for new business development [21] Q&A Session Summary Question: Why were volumes lighter in the coal segment? - Management indicated it was a collection of minor issues and not a cause for concern going forward [25][27] Question: Will MMLC return to profit next year? - Management confirmed expectations for MMLC to return to gross profit, contingent on improved pricing and consistent operations [28][29] Question: Why did North American Mining volumes drop? - The drop was attributed to reduced customer demand and mechanical issues with equipment, but repairs have been successful [41][42] Question: What is the allocation of the increased CapEx? - Most of the CapEx is related to growth initiatives and securing new contracts, with a focus on long-term projects [43][45] Question: How does the company view its leverage post CapEx cycle? - Management aims for less leverage over time, maintaining a conservative balance sheet to mitigate risks [75][76] Question: Can you elaborate on the parts business in contract mining? - The parts business is an evolution of the model to better serve customers by stocking hard-to-find components on-site [80] Question: Are draglines moved from coal mines to new quarries? - Draglines used in contract mining are separate from those in coal mining, and new quarries may utilize existing equipment or new acquisitions [82][83]