Ramaco Resources(US:METC)2020-08-08 00:24Financial Data and Key Metrics Changes - EBITDA for the first half was approximately $19 million, with nearly $11 million for the second quarter, reflecting a 30% increase quarter-over-quarter [10] - Net income increased by about 35% for the same period [10] - EPS for Q2 2020 was $0.06, up from $0.05 in Q1 2020, but down from $0.26 a year ago [22] - Revenue was $36 million, down 13% from Q1 and down 45% from the same period in 2019 [22] - Other income totaled $8.5 million, primarily from the anticipated forgiveness of the PPP loan [22] Business Line Data and Key Metrics Changes - Q2 sales were 362,000 tons, down 27% from the same period in 2019 [23] - Q2 2020 production was 390,000 tons, exceeding sales due to demand contraction [23] - Average price per ton in Q2 was $91, compared to $116 in the same period of 2019 [23] - Cash margins on company-produced coal were $17 per ton in Q2, down 35% from Q1 and down 62% from the same period in 2019 [24] Market Data and Key Metrics Changes - U.S. steel capacity utilization increased by 59% since last month [15] - U.S. manufacturing of passenger cars rose from about 2,000 units in April to approximately 140,000 units in June [15] - Current pricing for metallurgical coal is about $136 per ton FOB Australia, compared to a spot price of about $107 [15] - China's domestic steel production has fully rebounded, with met coal prices hovering around $50 per ton [16] Company Strategy and Development Direction - The company aims to remain conservatively geared to navigate market turmoil and be poised for recovery [12] - Focus on maintaining low debt, low mine costs, and strong liquidity while being opportunistic [21] - Plans to explore new markets, including a test shipment to Brazil and partnerships in Asia [19] - Development projects are on hold until market clarity improves, with potential for significant production increases once conditions stabilize [20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery of the U.S. economy and steel production, tempered by uncertainties [13][14] - The company is prepared for potential supply contractions due to market conditions and competitors' financial distress [17] - Management highlighted the importance of government stimulus and infrastructure spending for recovery in the metallurgical sector [32] - The company remains focused on health and safety measures related to COVID-19 while adapting operations accordingly [36] Other Important Information - The company received approximately $8.4 million in PPP financing, which helped bring back furloughed workers [11] - Capital expenditures for Q2 were $9.1 million, down 21% from the same period in 2019 [26] - The trailing 12 months net debt to adjusted EBITDA level is just under 0.3 times, indicating strong financial health [29] Q&A Session Summary Question: What should be expected regarding domestic pricing in 2021? - Management indicated that the tender sizes for 2021 are better than 2020, but caution is advised due to market uncertainties and potential resurgence of COVID-19 [63][64] Question: Is there a strategy to hold off on domestic contracts and focus on international markets? - Management acknowledged the leverage position and cost advantages, suggesting a balanced approach to domestic and international sales [66][67] Question: Will a significant portion of sales continue to be in the domestic market? - Management confirmed that domestic sales remain a priority, but they are also exploring international opportunities, particularly in Brazil and Asia [73][74] Question: How will the force majeure letters impact shipment modeling for the back half of the year? - Management noted the uncertainty surrounding force majeure impacts and emphasized the importance of long-term relationships with customers [78][80] Question: What is the estimated capital required to double production? - Management estimated that incremental capital expenditures to double production could range from $10 million to $20 million, depending on the projects undertaken [81][82]