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Peabody(BTU) - 2024 Q3 - Earnings Call Transcript
BTUPeabody(BTU)2024-10-31 18:19
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Financial Data and Key Metrics - Net income attributable to common stockholders was 101.3millionor101.3 million or 0.74 per diluted share, with adjusted EBITDA of 224.8million[22]−Operatingcashflowwas224.8 million [22] - Operating cash flow was 360 million, resulting in available free cash flow of 263.2millionforthequarter[22]−Thecompanycompleted263.2 million for the quarter [22] - The company completed 100 million in share repurchases during the quarter, bringing total repurchases for the year to 180million[5][23]−CashonhandasofSeptember30was180 million [5][23] - Cash on hand as of September 30 was 773 million, and a dividend of 0.075persharewasdeclared[23]BusinessSegmentPerformanceSeaborneThermal−AdjustedEBITDAforseabornethermalwas0.075 per share was declared [23] Business Segment Performance Seaborne Thermal - Adjusted EBITDA for seaborne thermal was 120 million, 16millionbetterthanthepriorquarter[24]−Productionexceededsalesby300,000tonnes,increasingexpectedfourth−quartersalesvolumes[24]−Realizedexportpricesincreasedby16 million better than the prior quarter [24] - Production exceeded sales by 300,000 tonnes, increasing expected fourth-quarter sales volumes [24] - Realized export prices increased by 7 per tonne, with segment EBITDA margin rising to 38% [24] - Costs were below guidance at 47pertonne[24]SeaborneMetallurgical−AdjustedEBITDAforseabornemetallurgicalwasapproximately47 per tonne [24] Seaborne Metallurgical - Adjusted EBITDA for seaborne metallurgical was approximately 28 million [25] - Shoal Creek shipped only 125,000 tonnes due to opportunistic withholding of spot sales and logistical challenges [25] - Metro made up for lower sales volumes at Shoal Creek, keeping the segment in line with previous guidance at 1.7 million tonnes [26] U.S. Thermal - Adjusted EBITDA for U.S. thermal was 80million,80 million, 27 million better than the second quarter [27] - Shipments totaled 26.1 million tonnes, with an average EBITDA margin of 3.07pertonne[27]−PRBshipmentsexceededexpectationsat22.1milliontonnes,withadjustedEBITDAof3.07 per tonne [27] - PRB shipments exceeded expectations at 22.1 million tonnes, with adjusted EBITDA of 51.7 million and margins more than doubling to 2.34pertonne[28]MarketPerformanceandOutlookSeaborneThermalMarket−Demandforthermalcoalcontinuestogrow,particularlyinAsia,withIndialeadingat122.34 per tonne [28] Market Performance and Outlook Seaborne Thermal Market - Demand for thermal coal continues to grow, particularly in Asia, with India leading at 12% growth, followed by China at 8% and North Asia at 2% [14] - Newcastle high-energy thermal coal prices averaged 140 per metric tonne [14] - The International Energy Agency forecasts coal consumption in 2030 to be 6% higher than their 2023 forecast [15] Seaborne Metallurgical Market - Premium hard coking coal prices fell to 180pertonneinearlySeptember,thelowestsinceJune2021,duetoweaksteeldemand[16]−China′sstimulusmeasuresinlateSeptemberimprovedsentiment,leadingtosomerecoveryinmetallurgicalcoalprices[18]U.S.Market−ElectricitygenerationintheU.S.grewby3180 per tonne in early September, the lowest since June 2021, due to weak steel demand [16] - China's stimulus measures in late September improved sentiment, leading to some recovery in metallurgical coal prices [18] U.S. Market - Electricity generation in the U.S. grew by 3% year-to-date compared to 2023 levels [20] - South PRB coal production volume increased by 33% during the quarter, with Peabody's share of total production at 43% [21] Company Strategy and Industry Competition - The company is making significant progress on the Centurion project, with first development coal produced and first customer shipments scheduled for the fourth quarter [6] - The Wambo underground mine closure has been accelerated to mid-2025 due to challenging geological conditions, with expected production of 800,000 tonnes in 2025, down from 1.2 million tonnes in 2024 [8][47] - The company is focused on maximizing value from its portfolio and maintaining cost discipline across its operations [7][11] Management Commentary on Operating Environment and Future Outlook - Management highlighted the resilience of seaborne thermal demand and stable pricing, particularly in Asia [13] - The company expects improved shipments from Shoal Creek in the fourth quarter following the resolution of the Black Warrior River outage [10] - The PRB experienced a slow start due to low natural gas prices but saw improved volumes in the third quarter [11] Other Important Information - The company has revised its full-year guidance, increasing seaborne thermal volumes by 200,000 tonnes to 16.2 million tonnes and raising other U.S. thermal costs by 2 to 45pertonne[29]−Capitalexpendituresfor2024havebeenincreasedby45 per tonne [29] - Capital expenditures for 2024 have been increased by 50 million, primarily due to accelerated development at Centurion and timing of spend at Wambo [29] Q&A Session Summary Question: Bonding obligations and potential capital unlock [34] - The company does not expect significant changes in bonding requirements or collateral levels, with 110millioninbondreductionsachievedearlierintheyear[35][36]Question:Metallurgicalcoalcosttrendsandoutlook[37]−Costshavetrendedtowardthehigherendofguidance,withShoalCreekproductionexpectedtoincreaseinthefourthquarter,leadingtoamodestdecreaseincosts[38][39]Question:Capitalreturnsandbuybackactivity[40]−Thecompanyremainscommittedtoreturning65110 million in bond reductions achieved earlier in the year [35][36] Question: Metallurgical coal cost trends and outlook [37] - Costs have trended toward the higher end of guidance, with Shoal Creek production expected to increase in the fourth quarter, leading to a modest decrease in costs [38][39] Question: Capital returns and buyback activity [40] - The company remains committed to returning 65% to 100% of free cash flow to shareholders and will continue to evaluate buyback opportunities based on market conditions [43][44] Question: Wambo shutdown and volume impact [46] - Wambo underground mine production is expected to decrease to 800,000 tonnes in 2025, down from 1.2 million tonnes, with potential negative mix shift due to lower Newcastle-grade coal [47][48] Question: Shoal Creek shipment expectations [50] - Shoal Creek is expected to ship 600,000 to 700,000 tonnes in the fourth quarter, primarily targeting the spot market in China and Southeast Asia [50][51] Question: CapEx increase and Centurion development [55] - The 50 million CapEx increase includes 30millionforCenturionand30 million for Centurion and 10 million for Wambo open-cut development, with no accelerated timeline for Centurion's longwall production [56][57] Question: Wambo open-cut production offset [59] - Increased production from Wambo open-cut is expected to partially offset the decline in underground production in 2025 [59] Question: Shoal Creek lock repairs and future impact [61] - Temporary repairs to the Black Warrior River lock are not expected to significantly impact future shipments, with permanent repairs coordinated to minimize disruption [62] Question: Centurion development coal sales [64] - Development coal from Centurion is expected to contribute around 480,000 tonnes in 2025, with shipments recognized as revenue [64] Question: Wambo EBITDA contribution [65] - Management did not provide specific EBITDA contribution figures for Wambo in the third quarter [66] Question: M&A and capital allocation [67] - The company did not comment on M&A activity but emphasized its strong balance sheet and commitment to shareholder returns [68] Question: PRB lease reopening and long-term optionality [70] - The company has sufficient lease holdings and reserves to meet demand for decades, with the ability to increase PRB output if economics support it [71][73] Closing Remarks - The company highlighted its safety achievements and thanked stakeholders for their support, reaffirming its focus on operational excellence and strategic priorities [76][77]