Warrior Met Coal(US:HCC)2020-08-10 03:53Financial Data and Key Metrics Changes - The company recorded a net loss of approximately $9 million or a loss of $0.18 per diluted share in Q2 2020, compared to a net income of $125 million or $2.43 per diluted share in Q2 2019 [16] - Adjusted EBITDA was $20 million in Q2 2020, down from $176 million in the same period of 2019, primarily driven by a 34% decrease in sales volume and a 38% decrease in average net selling prices [17] - Total revenues were approximately $164 million in Q2 2020, compared to $398 million in the same period last year, reflecting the impact of lower sales volumes and average net selling prices [18] Business Line Data and Key Metrics Changes - Sales volumes in Q2 2020 were 1.5 million short tons, down from 2.2 million short tons in the same quarter last year [11] - Production volume in Q2 2020 was 2.1 million short tons, slightly down from 2.2 million short tons produced in the same quarter last year [12] - The gross price realization for Q2 2020 was 100% of the premium Low Vol FOB Australian index price, higher than the 97% achieved in the prior-year period [13] Market Data and Key Metrics Changes - The average net selling price per short ton decreased approximately 38% in Q2 2020 compared to the same period in 2019, with a Platts Premium Low-Vol FOB Australian index price averaging $85 per metric ton [19] - Global pig iron production was down significantly, averaging 20% to 35% for Q2 2020, while China's production grew by 2.2% for the same period [8][7] - The Australian PLV was valued at $145 per metric ton before a major correction, closing at $116 per metric ton by the end of Q2 2020 [9] Company Strategy and Development Direction - The company has delayed the development of the Blue Creek project until at least early 2021, focusing on preserving cash and liquidity [29] - The company intends to adjust production rates in accordance with demand and manage potential disruption risks due to COVID-19 [35] - The company maintains a strong balance sheet and adequate liquidity, allowing it to weather prolonged economic challenges [37] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for Q3 volumes, noting that major steel demand sectors have started to show positive improvements [32] - The company expects current inventory levels to remain elevated through year-end, adjusting production rates based on demand [35] - Management highlighted the need for significant changes in market conditions to see improvements in met coal pricing [36] Other Important Information - The company reported a positive free cash flow of $32 million in Q2 2020, with cash used for capital expenditures and mine development costs of $31 million [25] - The total available liquidity at the end of Q2 2020 was $268 million, consisting of cash and cash equivalents of $221 million [28] Q&A Session Summary Question: Expectations for Q3 operating metrics - Management expects a slight strengthening in Q3 and Q4, with production rates adjusted to match sales expectations [41] Question: Capital allocation for full year 2020 - The company is rationalizing capital expenditures while continuing to invest in key projects like the 4 North mine [42][43] Question: Inventory management and production rates - Management intends to match production with sales volumes to avoid further inventory build [48] Question: Market demand and sales split - Sales split for the quarter was 75% in Europe and 25% in South America, with expectations to resume sales in Asia [49] Question: Volume commitments for the second half of the year - Management anticipates a gradual return to normal volume commitments, moving back towards 70%-80% [53][55] Question: Pricing expectations for Q3 - Pricing is expected to remain range-bound, with no significant increases anticipated in the near term [57] Question: Concerns about COVID-19 impacts - The company has had a few positive cases but has not experienced significant outbreaks, and is prepared for potential shutdowns [66]