Alliance Resource Partners(US:ARLP)2021-07-26 17:31Financial Data and Key Metrics Changes - Total revenues increased by 13.8% to $362.4 million compared to the sequential quarter, while net income jumped 77.9% to $44 million or $0.34 per unit, and EBITDA climbed 25.7% to $118.6 million [6] - Compared to the 2020 quarter, total revenues increased by 42%, net income rose by $90.7 million, and EBITDA surged by 145.9% [9] - Free cash flow generated in the quarter was $79.4 million, with $12.7 million returned to unit holders and $59.5 million used to reduce total debt and finance lease obligations [8] Business Segment Data and Key Metrics Changes - Coal sales volumes increased by 14.9% during the quarter, leading coal sales revenues to rise by 13.4% to $326 million compared to the sequential quarter [10][11] - The royalty business segment delivered $22.2 million of segment adjusted EBITDA, a 15.3% increase over the sequential quarter, with oil and gas royalties contributing $15.4 million [12] Market Data and Key Metrics Changes - Power demand in primary U.S. markets surged by 7.5% through the first half of 2021, with coal consumption expected to rebound by 16% for the full year [13][14] - International coal demand is rising due to global economic expansion post-COVID-19, with U.S. thermal coal exports projected to increase to 41-45 million short tons this year [15] Company Strategy and Development Direction - The company is increasing its full year 2021 guidance for coal sales volumes by approximately 6% to 32.9 million tons due to favorable coal market fundamentals [13] - The company is actively evaluating opportunities to increase production and sales in response to strong coal demand and pricing through 2022 [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the current tight labor market may limit production increases despite strong demand [16] - The company is optimistic about the contribution of its royalty segment to consolidated results, expecting continued growth in oil and gas production [17] Other Important Information - The company ended the quarter with liquidity of $500.5 million and reduced total leverage to 1.08 times, a 32.1% improvement since the beginning of the year [8] Q&A Session Summary Question: Inquiry about incremental pricing and commitments - Management indicated that some pricing was secured before the recent price increase, but they have factored this into their guidance, raising the average sales price by approximately $0.50 a ton [20] Question: Discussion on pricing trends in the market - Management confirmed that they are seeing strong pricing levels and do not anticipate a decrease in prices due to tight supply in the domestic market [24] Question: Potential priorities for free cash flow - Management stated that uncertainty in future prices makes it difficult to specify cash flow capital allocations at this time, but they will provide clarity in future calls [26] Question: Comments on cost pressures and guidance - Management acknowledged inflationary pressures from steel, oil, and labor, but noted that increased production is coming from lower-cost mines [28] Question: Discussion on leverage and capital allocation - Management emphasized a focus on growth opportunities while maintaining a target leverage level of one time [35] Question: Inquiry about labor relations and union activity - Management clarified that they are a non-union operator and are focused on maintaining good relationships with employees amid a tight labor market [38] Question: Discussion on the royalty portfolio and its value - Management highlighted that the standalone value of their oil and gas royalty segment is not fully reflected in current valuations, with potential for increased activity as commodity prices improve [42]