Warrior Met Coal(HCC) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Q1 2024 net income on a GAAP basis was $137 million or$ 2 62 per diluted share compared to $182 million or$ 3 51 per diluted share in Q1 2023 [21] - Non-GAAP adjusted net income for Q1 2024 was $2 63 per diluted share compared to$ 3 57 per diluted share in Q1 2023 [21] - Adjusted EBITDA for Q1 2024 was $200 million compared to$ 259 million in Q1 2023 with an adjusted EBITDA margin of 40% vs 51% in Q1 2023 [21] - Total revenues for Q1 2024 were $504 million compared to$ 510 million in Q1 2023 a decrease of $6 million primarily due to a 9% decrease in average net selling prices offset by a 9% increase in sales volume [21] - Free cash flow for Q1 2024 was$ 2 million compared to $110 million in Q1 2023 primarily due to higher accounts receivable and Blue Creek CapEx spending [61] Business Line Data and Key Metrics - Q1 2024 sales volume was 2 1 million short tons 9% higher than Q1 2023 driven by increased production volumes following the end of the labor strike [3] - Production volume in Q1 2024 was 2 1 million short tons 17% higher than Q1 2023 the highest quarterly production output in the last three years [59] - Cash cost of sales in Q1 2024 was$ 284 million or 57% of mining revenues compared to $232 million or 46% in Q1 2023 [72] - The company spent$ 102 million on CapEx and mine development in Q1 2024 including $69 million on the Blue Creek project [59] Market Data and Key Metrics - Q1 2024 sales by geography were 44% into Europe 18% into South America and 38% into Asia with Asian sales up 17 percentage points compared to Q1 2023 [3] - Spot volume in Q1 2024 was 37% higher than the 29% in Q1 2023 with expectations for spot volume to be approximately 25% of total sales volume for the full year [3] - The PLV FOB Australia Index ended Q1 2024 at$ 2 22 per short ton $72 lower than its December 31st value and$ 85 lower than the peak of $307 per short ton achieved in early January [50] - Global pig iron production decreased by approximately 1 4% for the first three months of 2024 compared to the prior year period with Chinese production down 2 9% and the rest of the world up 1 9% [50] Company Strategy and Industry Competition - The company is focused on the disciplined development of the Blue Creek growth project which is on track for the first development tons from continuous miner units in Q3 2024 and longwall start-up in Q2 2026 [4][20] - Blue Creek is expected to produce 4 8 million short tons of premium High Vol A steelmaking coal annually after the longwall start-up enhancing the company's global cost curve positioning and delivering incremental profit and cash flows [4] - The company expects demand from the world's largest met coal import regions to remain softer in Q2 2024 with pricing expected to remain lower compared to Q1 2024 potentially challenging higher cost and marginal producers [5] Management Commentary on Operating Environment and Future Outlook - Management expects Q2 2024 demand to be subdued in India due to national elections and the monsoon season while remaining cautious on China due to weak property and construction segments [5] - The company expects disruptions caused by the Baltimore bridge collapse to be manageable and contained within Q2 2024 [5] - Management is focused on maximizing average net selling prices and managing higher than normal inventory levels if necessary [5] - The company reaffirmed its full-year 2024 outlook expecting better demand in the second half of the year [61] Other Important Information - The company's headcount was 33% higher at the end of Q1 2024 compared to Q1 2023 primarily due to the end of the labor strike [59] - The company plans to begin accepting applications for positions at the Blue Creek Mine in Q2 2024 [59] - The company's total available liquidity at the end of Q1 2024 was$ 801 million consisting of cash and cash equivalents of $694 million and$ 107 million available under its ABL facility [61] Q&A Session Summary Question: Near-term outlook for Q2 shipments and realizations - Management expects lower shipments in Q2 but realizations to continue the favorable trend from Q1 [22] - Spot opportunities are expected to remain scarce and skewed towards the Pacific Basin [5] Question: Capture rate of 84% in Q1 - The capture rate is calculated as the net average selling price divided by the average index price for the quarter [28] Question: Split between CFR and FOB business by mine - All coal flowing into Europe (44% of Q1 sales) is FOB while South America (18%) is also FOB with a smaller percentage going into Asia as FOB [43] Question: Blue Creek development progress and production expectations - The company expects to produce approximately 200 000 short tons of High Vol A steelmaking coal in H2 2024 with development tons sold in H2 2025 after the preparation plant comes online [20] - The company plans to run three continuous miner units by year-end 2024 producing about 200 000 tons clean equivalent with total production of about 1 million tons by mid-2025 [75] Question: Logistics and port upgrades - Improvements at the Port of Mobile have made a significant difference in efficiency with longer transit times due to issues in the Red Sea and Panama Canal impacting transportation costs [38] Question: Labor hiring progress - The company is on schedule with hiring plans for 2024 including 100 positions at Blue Creek and has seen a strong reception from applicants [76] Question: Blue Creek incremental volume contracting - The company plans to canvas customers for test volumes rather than selling into the spot market [77]