NACCO Industries(NC)2020-03-05 19:28Financial Data and Key Metrics Changes - For the full year 2019, consolidated net income increased to 34.8 million in 2018, while fourth quarter net income decreased to 0.91 per share from 1.57 per share in the prior year [5][6] - The effective income tax rate for 2019 was 8.7%, down from 17.5% in 2018, influenced by a 2 million unfavorable adjustment to mine reclamation liabilities in Q4 2019 [6] - The Minerals Management segment saw a significant increase in royalty income in 2019 compared to 2018, but a decrease in 2020 is expected due to natural gas price expectations and fewer new wells [13] - North American Mining is anticipated to see increased limestone deliveries and improved operating results in 2020, although operating expenses are expected to rise due to higher employee-related costs [11] Market Data and Key Metrics Changes - The company expects overall coal deliveries to increase modestly in 2020 due to reduced planned power plant outage days and increased dispatch days [9] - Royalty income in 2020 is expected to decrease significantly, particularly in the first half, compared to the historically high revenue levels in early 2019 [13] Company Strategy and Development Direction - The company is focusing on diversifying its mining operations beyond coal, with plans to expand into lithium and limestone mining, leveraging existing skills in surface mining [27][26] - There is an emphasis on maintaining a conservative balance sheet while pursuing growth and diversification, particularly in the minerals segment [35] Management's Comments on Operating Environment and Future Outlook - Management anticipates a decrease in consolidated net income for 2020 compared to 2019, primarily due to reduced operating profit in the Minerals Management segment and the absence of prior year tax benefits [14] - The company is committed to maintaining a conservative cash position to support long-term growth and manage risks associated with the coal industry [35] Other Important Information - The company ended 2019 with consolidated cash of 24.9 million, with expectations of significantly decreased cash flow in 2020 due to increased capital expenditures [15] Q&A Session Summary Question: North American Mining's revenue growth and profitability - The management discussed the evaluation of projects based on internal rate of return and return on total capital employed, emphasizing a disciplined approach to growth [18][19][20] Question: Comparison of lithium and lignite mining - Management highlighted the similarities in operational skills required for both types of mining and noted the positive market dynamics for lithium compared to coal [24][27] Question: Future acquisitions in the minerals segment - The company is considering acquiring mineral interests that can be leased out for royalties, similar to existing operations in Ohio [28][31] Question: Cash management and share buybacks - Management confirmed a conservative approach to cash management, balancing growth ambitions with the need to maintain liquidity for potential risks in the coal industry [35][36]