Warrior Met Coal(US:HCC)2021-02-25 01:49Financial Data and Key Metrics Changes - The company recorded a net loss of approximately $34 million or a loss of $0.66 per diluted share in Q4 2020, compared to a net income of $21 million or $0.41 per diluted share in the same quarter last year [24] - Adjusted EBITDA was $9 million in Q4 2020, down from $45 million in the same quarter last year, primarily due to a 22% decrease in average net selling prices [25] - Total revenues were approximately $212 million in Q4 2020, an increase from $205 million in the same quarter last year, driven by a 33% increase in sales volumes [26] Business Line Data and Key Metrics Changes - Sales volumes in Q4 2020 were 2.2 million short tons, compared to 1.7 million short tons in the same quarter last year, indicating a recovery in sales [17] - The gross price realization for Q4 2020 was 102% of the Platts Premium Low Vol FOB Australian index price, higher than the 97% achieved in the prior year [20] - Mining cash cost of sales were $190 million or 92% of mining revenues in Q4 2020, compared to $142 million or 72% of mining revenues in the same quarter of 2019 [28] Market Data and Key Metrics Changes - The Platts Premium Low Vol FOB Australian index price averaged $108 per metric ton in Q4 2020, down 23% compared to the same quarter last year [27] - Global pig iron production was down less than 1% for the full year 2020, with China achieving a record-breaking production of 887 million metric tons, a year-over-year increase of 4.3% [15][16] - The Chinese ban on Australian coal significantly impacted the market, leading to a decoupling of premium low-vol CFR China based indices from premium low-vol FOB Australian indices, with spreads increasing to over $100 per metric ton by the end of Q4 2020 [14] Company Strategy and Development Direction - The company is focused on preserving cash and liquidity while balancing long-term CapEx investments to benefit from the eventual recovery in steel production and met coal demand [9] - The development of the Blue Creek project has been delayed until at least summer 2021 to prioritize cash preservation [42] - The company aims to strategically place some spot volumes into China to capture temporary pricing distortions while maintaining relationships with long-term customers [45] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the ongoing uncertainty related to the COVID-19 pandemic and the Chinese ban on Australian coal, stating that full-year 2021 guidance will not be provided at this time [40] - The company expects to maintain elevated inventory levels to mitigate risks associated with potential disruptions due to COVID-19 [47] - Management believes that demand for products should remain stable, but price volatility presents the greatest uncertainty in the short term [46] Other Important Information - The company achieved positive free cash flow of over $1 million in Q4 2020, driven by cash flows from operating activities of $30 million [33] - Total available liquidity at the end of Q4 2020 was $244 million, consisting of cash and cash equivalents of $212 million and $32 million available under the ABL facility [39] - The union contract is set to expire on April 1, and negotiations for a new contract are ongoing [48] Q&A Session Summary Question: Can you provide some color on the first quarter regarding volumes and pricing? - Management indicated that operations are running as expected, but did not provide specific details on volumes [54] Question: What are your expectations for committed volumes for 2021? - Management noted that spot sales have been running about 50% of quarterly volumes and expect to improve that ratio as markets recover [60] Question: Why not run full out given the market conditions? - Management explained that while Australian coal is not entering China, the market remains balanced, and they are focusing on brand recognition in China [65] Question: Can you discuss the costs for the quarter? - Management noted that fixed costs spread across fewer tons due to reduced production led to higher costs per ton in Q4 [75] Question: What is the expected CapEx range for 2021? - Management expects CapEx to be in the range of $100 million to $120 million, depending on market conditions [78] Question: What clarity is needed before starting the Blue Creek project? - Management indicated that clarity on COVID-19 impacts and demand is necessary before committing significant funds to the project [102]