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NACCO Industries(NC) - 2019 Q3 - Earnings Call Transcript
NCNACCO Industries(NC)2019-11-02 00:06
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Financial Data and Key Metrics Changes - Consolidated revenues increased to 32.6millionfrom32.6 million from 31.4 million in the prior year third quarter, while operating profit decreased to 8.7millionfrom8.7 million from 10.5 million [6] - Consolidated net income increased to 10.3millionor10.3 million or 1.47 per share, up from 9.2millionor9.2 million or 1.33 per share last year, primarily due to a 2.7millionpre−taxpaymentassociatedwithapriorventure[7]−Theeffectiveincometaxratefortheyear−to−dateperiodwas14.12.7 million pre-tax payment associated with a prior venture [7] - The effective income tax rate for the year-to-date period was 14.1%, compared to 12.7% in 2018 [8] Business Segment Data and Key Metrics Changes - In the Coal Mining segment, operating profit decreased due to reduced earnings from unconsolidated operations and higher employee-related costs, including a 700,000 increase in non-cash equity compensation [9] - The North American Mining segment reported an operating loss this quarter compared to a modest profit in the prior year, driven by higher employee-related and business development costs [10] - The Minerals Management segment saw an increase in operating profit during the first nine months of the year, but a decrease is expected in the fourth quarter and full-year due to natural gas price expectations and production declines [24][25] Market Data and Key Metrics Changes - Coal deliveries are expected to decrease in the fourth quarter and for the full year compared to the prior year due to anticipated changes in customer requirements [12] - For 2020, coal deliveries are expected to increase compared to 2019, primarily at unconsolidated operations due to a reduction in planned power plant outage days [15] Company Strategy and Development Direction - The company is focusing on capital expenditures, expecting 30millionin2020,primarilyduetospendingatMississippiLigniteMiningCompanyfornewmineareadevelopment[17]−NorthAmericanMininghasenteredintoanagreementtoserveastheexclusivecontractminerfortheThackerPassLithiumproject,whichisbelievedtobethelargestknownlithiumdepositintheU.S.[20][21]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementexpectsoveralldeliveriesintheCoalMiningsegmenttodecreaseinthefourthquarterandforthefullyear,butanticipatesamodestincreaseinoperatingprofitduetoreducedoperatingexpenses[13]−For2020,managementexpectssubstantialincreasesincoalminingoperatingprofit,particularlyinthefirsthalfoftheyear,drivenbyimprovedearningsatconsolidatedoperations[16]−Thecompanyforecastsadecreaseinconsolidatednetincomefor2020comparedto2019,primarilyinthefirsthalf[29]OtherImportantInformation−Thecompanyendedthethirdquarterwithconsolidatedcashonhandof30 million in 2020, primarily due to spending at Mississippi Lignite Mining Company for new mine area development [17] - North American Mining has entered into an agreement to serve as the exclusive contract miner for the Thacker Pass Lithium project, which is believed to be the largest known lithium deposit in the U.S. [20][21] Management's Comments on Operating Environment and Future Outlook - Management expects overall deliveries in the Coal Mining segment to decrease in the fourth quarter and for the full year, but anticipates a modest increase in operating profit due to reduced operating expenses [13] - For 2020, management expects substantial increases in coal mining operating profit, particularly in the first half of the year, driven by improved earnings at consolidated operations [16] - The company forecasts a decrease in consolidated net income for 2020 compared to 2019, primarily in the first half [29] Other Important Information - The company ended the third quarter with consolidated cash on hand of 115.1 million and debt of $7.7 million [30] - Full-year 2019 cash flow before financing activities is expected to increase over 2018, but a modest use of cash is anticipated in 2020 due to increased capital expenditures [31] Q&A Session Summary Question: What does a normal CapEx year look like? - Management indicated that CapEx is driven by consolidated coal mining operations and North American Mining, with higher CapEx expected in 2020 and 2021 due to moving into a new mine area [36] Question: Why is MLMC's adjusted return on tangible capital employed important for shareholders? - Management explained that it measures the cash flow generated compared to the capital employed, ensuring responsible stewardship of capital [44][46] Question: Will the management fee per ton for lithium be significantly higher than for lignite? - Management clarified that the service provided for lithium mining is similar to coal mining, and the fees will be calculated in a similar way, regardless of the product's value [48][49]