Warrior Met Coal(US:HCC)2022-02-23 02:50Financial Data and Key Metrics Changes - The company recorded its largest quarterly net income in three years of approximately $139 million or $2.68 per diluted share compared to a net loss of $34 million or $0.66 per diluted share in the same quarter last year [14] - Non-GAAP adjusted net income for the fourth quarter was $3.17 per diluted share compared to an adjusted net loss of $0.63 per diluted share in the same quarter last year [15] - Adjusted EBITDA was $240 million in the fourth quarter, the largest in three years, compared to $9 million in the same quarter last year [15][16] - Total revenues were approximately $416 million in the fourth quarter compared to $212 million in the same quarter last year [15] Business Line Data and Key Metrics Changes - Sales volume in the fourth quarter was 1.5 million short tons, down from 2.2 million short tons in the same quarter last year, primarily due to an ongoing strike [8] - The gross price realization for the fourth quarter was 85% of the Platts Premium Low Vol FOB Australian Index price, lower than the 102% achieved in the prior-year period [9] - Production volume in the fourth quarter was 1.1 million short tons compared to 1.8 million short tons in the same quarter of last year [10] Market Data and Key Metrics Changes - The Platts Premium Low Vol FOB Australian Index price averaged $369 per metric ton for the fourth quarter, up 241% compared to the same quarter last year [16] - The CFR China prices dropped from an all-time high of $615 per metric ton to a low of $337 per metric ton at year-end, a 45% price erosion [5][6] - Global pig iron production increased by 0.6% for the full year of 2021, with Chinese production decreasing by 4.3% [7] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet and financial position while pursuing long-term shareholder value [14][25] - The company has delayed the development of the Blue Creek project and temporarily suspended its stock repurchase program while accumulating cash [25][26] - The company expects to fulfill customer commitments for 2022 of approximately 5.5 to 6.5 million short tons, assuming no new contract with the union [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of inflation and supply chain disruptions on operations and profitability in 2022, expecting increases in costs for steel, freight rates, and labor [29] - The company is taking a patient wait-and-see approach to capital allocation and is monitoring changing Chinese policies that may impact the coal and global steel markets [26][30] - Management expressed optimism for the business entering 2022, citing the resilience of the business model despite challenges [35] Other Important Information - The company generated $151 million of free cash flow in the fourth quarter, resulting in a free cash flow conversion of 63% [23] - Total available liquidity at the end of the fourth quarter was $479 million, representing an increase of $123 million over the third quarter [24] - The company incurred incremental non-recurring business interruption expenses of $7 million related to the ongoing UMWA strike [21] Q&A Session Summary Question: Will Warrior pay out special dividends during the ongoing strike? - Management indicated that it is a possibility but will depend on market conditions and clarity on various factors [39] Question: What is the reasonable timeline for updates on capital allocation policy? - Management suggested updates may be available in the next few months [41] Question: What is the reference price embedded in the cash cost guidance? - Management indicated that the guidance is built around a steep correction starting in the second quarter, with a reference price near $200 [44] Question: Can you provide an update on the Blue Creek project re-evaluation? - Management confirmed that the re-evaluation includes capital costs and strategic fit within the company's portfolio, with updates expected in the coming months [50] Question: What percentage of sales were to CFR China last year? - Management clarified that the dynamics of sales to China are currently uncertain and will depend on market conditions [60]