Warrior Met Coal (HCC) 8 May 212021 Q1 Earnings call transcript

Good afternoon. My name is Nick, and I'll be your conference operator today. At this time, I would like to welcome everyone to Warrior Met Coal First Quarter 2021 Financial Results Call. [Operator Instructions]. This call is being recorded and will be available for replay on the company's website.

have contain to results forward-looking materially those I discussion that may begin, from may today statements discussed. we been note asked this differ Before and actual

the company's statements, also call have asked in section during the www.warriormetcoal.com. of to Investors company accompanying refer forward-looking non-GAAP filings. the been regarding company's that the release posted information and SEC tables company's more to For located the earnings this the website has press note financial release I discussed on please of press reconciliations measures at

to In at posted the www.warriormetcoal.com. slide earnings Investors addition brief to the has release, the presentation website a company section its of supplemental

Financial remarks. are Here Walt Mr. Executive Scheller, Officer. today Please you Chief Chief and Mr. begin may go discuss to Scheller, company's ahead. your results Mr. Officer Boyles, the Dale

everyone, to time to and quarter Dale Hello, additional results taking operator. our join ask results. in us and will After thank for first the to opportunity my you'll remarks, have discuss our XXXX you the questions. Thanks, review then today detail

on quarter, across first ban the the Chinese and continued coals coal both have COVID-XX a met industry. and the we impact demand saw on During Australian pricing

necessary managing began. to remain the we while business pleased quarter pricing, met while comply be cash maintaining cash the pandemic various especially headwinds, fourth our operations. personal employees take control. we coal adjust can to these environment to to the preserving of and protect to focused organizations health continue We for guidelines set We workplace safety and were consecutive that with flow our of our and free distancing on by social measures hygiene since forth aspects the the challenging health Despite on liquidity positive the

our achieved cash per going second since ton public. we lowest cost Importantly, short quarterly

high depressed on geographies the the inventories ban pricing during the Chinese the continued some impact allowing which Chinese Association Australian monetize of year-over-year from Global higher-than-normal first record spot its Steel market on quarter, in X%. to fundamentals benefit The markets. our our we first of during partially all leading increase quarter, steel natural production levels. in quarter, reported able World offset across of were coals a Strong to on the China increase with environment pig X% strong the pre-pandemic a to iron experienced recovery volumes, demand the customers first their As persisted has prices our path steel production products. global for remains charge for with and

bound more pace benefiting side, Excluding ton China imports. index non-Australian the coal metric $XXX China, range coking system premium the elevated a moderate rest Chinese ban Unfortunately, most split hard a for one of On in have between from met the at that coals coal X%. you markets per due of was Australian grew into remained of a pricing stable the CFR-based world price the $XXX and to of ongoing and imported quarter. first X-tier

in by from On in metric and per their volatility natural India more high point, At saw premium its Australian making are also the created late March. price Australian started hitting prolonged index at in the shifts a ton per The its also of South been Vietnam of into Japan, trade low in China the low gradual has of and as Europe our and have start ton and the side, and metric coals patterns markets its ban South America. low decline, $XXX way import late climb have Korea, other $XXX pricing. peak at coals We ton that high price this impacted you January. $XXX metric the year per of Australian-based of by

was Chinese interest February. celebrations Year their New anticipated, in during low buying As

longer period a holiday. subdued it However, for expected the remained than following

and was transactions quarter in the interest and since. active prior uptick of observed to has an end remained the However,

had sales strong volume million in entire quarter. our the X short quarter for year. the the Sales contracted first to tons first same last tons As markets expected, million in were natural X.X short into compared we quarter was

geography and Europe, first into a the quarter in little quarter The the and a mines Our volume in more X.X sales the first quarter were for XX% amount by well South into same tons into compared XXXX ran was year. last to inventory. of we first similar built XX% of the Production Asia. quarter, short in America XX% million

As us X.X XXX,XXX the to of levels. increased inventory levels Coal inventories planned our short supply allow of continue rest quarter. customers the pre-pandemic of tons quarter will and at to year. elevated end remained at communicated, tons the first to The the during compared to million valued short previously levels inventory end the the first higher-than-normal

prior realization gross XX% Australian achieved XXXX FOB year than premium low-vol and Our index higher price the for Platts quarter the first the XX% of the period. was of was in price

higher due gross a of Chinese customers was index the percentage to better price to sales realization Our at primarily price. CFR our

compared of total sales also on expectation volume first spot to April America XX% our was quarter first Our of quarter in Mine United Workers of coincided the agreement with approximately the collective normal volumes of a XX%. X. approximately our with expiration the of bargaining The end

plans new the that quarter prepared more contract, remarks, to our a today. valued faith negotiate needs to have to now our provide with UMWA continues reach strike in color the Dale I'll in Later has initiated in to ask the in of greater continue we a I'll first While on the our customers. business detail. meet UMWA address results place we continuity good

Thanks, Walt.

$XX of XXXX, last the or the $XX diluted quarter, year. net of million excluding of the loss quarter share for to first the was a compared to a the XXXX diluted $X.XX primarily average a sales driven the in quarter year. $XX last or $X.XX million volume. offset per selling Adjusted of same compared in decrease share diluted diluted For million net in EBITDA in income quarter a approximately tax on share of to per same charge of $X.XX higher Non-GAAP prices, quarter the GAAP per loss $XX by basis first per as The net net income million by $X.XX noncash decrease in was quarter share quarterly a partially the allowance, company was adjusted XX% recorded valuation same compared first XXXX. for

sales compared X% million short revenues lowest We $X the quarter ton of the net in spending $XX was in $XX first in quarter balances. levels. of primarily This to Our volume an in XXXX. the XX% quarter. primarily wages, and XX% a weak primarily in total our associated million first gross of on an other first quarter income selling expenses. X royalties or during same employee-related total $XXX borrowings to last in short quarter-over-quarter the revenues The increase lower cost averaged $XX the controlling about was $X port transportation year, This quarter ton with per same year, averaged amount the short same outstanding and sales and recorded FOB by quarter the revenues first of sales was professional partially year. to to first approximately XXXX issuance a expense our on volume, our $XXX last year's to of Total to quarter, $XX the and pricing, $X for $XXX in XX% due facilities, margin million This was per to amount or approximately lower XX% ton an price year. for coal and price along million EBITDA focus The of mining costs first facility was in quarter of in vary adjusted and quarter on about of to million $XXX Depreciation in on the expense offset plus the and by in premium XXXX or due quarter. cash The by to million control. XX% increase slight net in our expense the the higher same in in variable the XXXX compared the to Demurrage last same quarter amortization costs price-sensitive SG&A interest cost were earlier. offset of short than $XX XXXX service first of included of in first the sales per interest million to our debt ton Australian compared $X approximately $XXX expenses per incremental the focus primarily XXXX metric on decrease same the or depletion mining last was were was of with same the last year. costs, credit that to XXXX. revenues and expenses the were XXXX the lower was quarterly quarter X.X% period last per million quarter partially index debt $XXX compared XX% due Net fees higher income. ton average metric lower on $XXX to quarter primarily average compared in last Cost Platts same of of of first interest due charges in million the noted assets year. period FOB price million quarter a Cash second as ton in and million in last such first in price were in decrease to $XX higher lower placed cost XXXX were as returns selling quarter with Cash years. quarter last environment, increase dollars a met our of same tax of reduced ABL of the year. XX% $XX was compared compared quarter compared down lower of price prices, quarter higher low-vol the due index Walt offset quarter an The compared cost. realization per first in to

The state tax and against establishment of expense are written to change net Alabama assets. have This recognized valuation our in sales result first tax deferred essence, as longer effective law noncash upon quarter's the Alabama down. the a beginning allowance became to value state charge operating tax our been a export of income our year. In was the included taxes, losses a in due no of that February the of state state income therefore, subject

cash Turning flow. to

quarter volumes lower flows used expenses to costs quarter. partially in higher other same activities generated this in development flow, quarter net cash quarter expenditures the $XX $XX quarter in mine higher year, we collections in and a operating compared and mine the in lower small The offset used positive last by first During first compared flow sales Cash impacted was cash million cash XXXX last free the XXXX to $XX Free XXXX, in from by million cash expenditures net capital of an first million. capital million $XX million and cost for during were to higher due of $XX decrease same resulted of provided flows in in cash receivables, plus investing first was the working on by the for decrease capital activities positively capital. development of due primarily the receivable, accounts cost. of XXXX of quarter of primarily quarter working prepaid which to increase inventory Operating were year.

million first flows payment unprecedented quarter times. activities quarter or by was and dividend quarterly during last costs. the financing spending million. on the for continue leases The Cash compared in company consisted same higher $X payments We of by used spending capital XX% the to period $XX the less of XXXX in spent were and $XX the development of first largely on which year, these $X offset primarily of mine XXXX million to CapEx of of rationalize million

We Our balance adjusted sheet of believe to times. remains navigate liquidity ratio uncertain leverage strong our adequate a X.Xx with these EBITDA. is

quarterly our pandemic. with with a sheet structure, no variable during balance near-term combined and us cost maturities, to allowed continue strong has dividend low paying the debt Our

which total $X consisting million, cash facility, $XXX and and million credit liquidity of Our of $XX of of first cash and is outstanding was million the $XXX of quarter ABL available borrowings approximately at net available the million million. letters end under equivalents $XX of of our

coal to turning related to the the Chinese Due year potentially the our not disruptive outlook. be the Now Australian uncertainty time. union, pandemic, providing XXXX on with negotiations our full guidance we will COVID-XX ongoing at other to this ban and factors,

issues. on to is providing expect once We to these return there further guidance clarity

expenditures, capital adjust appropriately to our needs, managing continue our We capital, liquidity flows. expenses, working cash including operational and

I'll the We also and for of temporarily stock remains Walt suspended. have program final his back delayed repurchase development to turn the comments. it Creek project, now Blue our

Thanks, Dale.

partial move of do make seaborne we in and to trade ban a coals still at efficient on market that time. believe have like to easing likely is when We I'd on to Before not Australian normal the of or conditions, to coal final will to Chinese return although some Q&A, full comments. some point a met of we happen the most clear view continue

We the expect the levels. normal narrow the the place. ban is in Australian the in as FOB remain returning current once pricing in place difference indices the to to as between China bifurcation markets to expect and We lifted, CFR remains would ban long

next well customers' with Australian cleared buying our of the for customers COVID-XX-related as our by few off markets as volumes remain America. indicated focused demand may ongoing to ports that correction that that labor believe time quarters, the We the our patterns. customs. South the taking will been remain We'll duration coast in strong offloaded disruptions, serving coals take possible. China but plenty volumes of negotiations, Europe as as mostly have have for large our we advantage the vessels However, there of Asia, and when floating spot not demand vulnerable of on coals in our the through are coals of while Also, remain believe some

approximately today. and We the on mentioned are initiated the that expected rest the tons through fill our our coal and X.X existing strike believe volume to the positioned commitments continues combination well I of a production April X.X with to a we of of million earlier, million that XXXX short UMWA for X.X short of year. inventory As customer has UMWA tons contract during X, million expired

have X. now, idled mine For we

at X, expect rates. production We although at mine lower-than-usual to continue

the plans While significantly XXXX. production and we shipment have from vary business and continuity disruption the to in strike may quarter-to-quarter activities place, in still cause may plans

plans Finally, as customer continue Operator? to we'd to to meet we execute navigate open will through for call continuity business the we questions. these headwinds, our With that, our like demands.

[Operator Instructions].

the of question BMO. David first Your from comes Gagliano, line

end think, commentary little about the million, obvious I the the we first I in the remainder strike The of sales of ask essentially we us just the it's bit I'm X.X color strike the how year remains thinking the as I the and how is should each we year X.X million model way going to quarter. that wanted right? -- a quarterly current strike if tons, question, than in sales commentary assuming the volumes sort situation volumes. production. front a of can there's persists. place is So regarding guess about had on If higher some X.X to quarter for you that full average. and -- be million around is give degradation of should to be that the in

throughout Walt. in that really pretty just strike. breakdown a first giving to the X.X that we've kind be quarter, the we quarter-by-quarter for fact tough, of disruptions is, And know we of walked is the to Dave. is in reason actually will this had X.X The due the million what caused way the the -- about X.X the million Well, don't million in sales. period This through is

million X.X to hit. X leave to that million with So will us

We have X.X million in inventory.

that like operating X.X take that plans XXX,XXX down to for around brings which to have. we with year, level be, we quarter. produce million we'll a down brings the us down XXX,XXX achieve we it, we able million tons, to that the be to call X.X needing where to, of you is If the that to which think to the XXX,XXX us a say remainder to And quarter

We units have us to mine time enough for at that. able miner lead be X on continuous do our to

quarter-to-quarter. about because that's exactly much just play comfortable you things as giving feel know guidance out I So as I will don't how

terms in here. That of Yes. Understood. sense the makes unknowns

X.X but the year to this spread X.X just year? the to million kind at it million if the for to point remainder over reasonable use is effectively just of the that were range, So so to of continue strike and it -- evenly again, clarify,

that's Yes, reasonable.

Okay.

cash we at just are adjust approach to up for going there of in obviously, volumes that Okay. volumes, gross assume of quarter. other and the costs we a the But one a similar were, that extraordinary the way view, reasonable be is so to The sort least number adjust then suggests costs shouldn't exceptionally in kind of lower, Obviously, it? cash if we And lower good Was quick anything forward? then my question. that level have going to just to that still that.

Dale. it's our mean, more on obviously costs low, little really quarter. in we're I got Yes, focused the we a keeping David, volume and

year, significant. to was bit So our the some incur stuff again, lower, than nothing the for legal fees rest some be the other Look, negotiation we're we of -- in little idle expect mine and costs around the cost there cost like that with that. to other going do the fees cash with X but and associated then a strike,

we're higher have So going to some costs. other

So may offset some other may be while you per cost that down, cost the that. ton have

significant because issues. any we those don't So of offsetting see change

Okay.

cash have volumes, in even similar ton your in Sorry, basis will with lower cash kind to issues per cost that per on you so being near clarify, per the just ton ton of cash the think cost result a offsetting quarters? cost

what and at levels inventory, have prior levels, sell working right, of in we produced right, was if everything. prior Well, which we people

on incremental that right, costs you'll lower bleed I costs all wouldn't total, normally some in after inventory. you cash the with the say, offsetting strike we after to like start have. associated that, until you again, volumes. turn won't would those that cost, So Then cash lower off see But

[Operator Instructions].

B. Securities. Lucas of Riley from comes Pipes question Next

is My the to at of sold wondered flavor is million first million possible a to I languishing for Australian for give tons. of example? And U.S. a of of comments us into bit little would if X.X also pricing? equivalent that. X.X be obviously geographic still on the appreciate for Would index higher commitments XXXX, question commitments those on due more And the your higher-priced it's just the Coast off Or mix the the sales those market, to commitments. really the and is would benchmark, which Chinese thoughts those East Or ban? be what

The think customers that Asia, And a are I to into some But prices. into in lower and the those participate, into to us South opportunities kind expect offset Europe, commitments others much also level. in to expect direction, of there's Chinese kind America on this also based those in were are allow we but so targets, of America of we'll see normalized quarter, or what Asia. and us closer are price. in and the is be bring don't Australian and pricing move the And into things what I and of the there few primary swapping to that our to the us as low-vol I throughout Europe, did that that's expect to seen back numbers. into we've CFR to market's first been it opportunities enough which or so and year XX South a is traditional XX whole I way the get back XX to

helpful. That's

right think about benchmark, kind the now, way it with near simplistically that be to modeling So and of for Australian very be benchmark? that the would pricing --

Yes.

question I cost want to then the return Dave's side. And to on

quarter, all the selling that like I of think, of you'd tons XXX,XXX in if essentially per quarter, means inventory. kind out to think we -- second So inventory your XXX,XXX about, be

cost or Dale, of step-up inventory at, the a basis that Then a costs, ton to current the So and, on ton similar QX? kind not? that should the thinking basis per should kind of QX in a as assuming continues, costs kind of strike be you the step-up -- back exhaust we again, lower on in course? of be would be then, per a about So still

cost cost would incur you will after little such that, I'll if cost But the be bit what little sales, producing X as around bit think of yes, and slightly I a in off I cost fees QX, some But clearly costs, we what then just a than and we're related the the and additional other clear. be your sell But similar we legal at P&L, -- higher. negotiations some have after said, per expenses strikes, a as will such in see ton. cost, that other now lower hopefully, other mine to as inventory, be idling not, would there. you that

So when about I'm dollars. talking total

your of cost some offsetting while bit may pure a to have sales, per just that. a costs So ton cost kind going cash little be on we're lower, other of

circle that. with appreciate Got that want That's it. I one May later. ask question. to helpful. I back final But

forward Just you years. a and the pretty your differentiator, to the cost structure has difficult, you is I that important would given side? during you on I share. well market past Can going over you any this positioned Thank is say been but you're cost the structure, -- variable true variable including thoughts really negotiating, coal a met -- X labor have volatile can how for know but

for the we part like X I benchmark rail variability, the bonuses royalty very say, last was actuality, when I a over has primarily based variability years, the just with small pricing. rates. variability on huge contract a it think and look the around impact Well, the would the labor In that things of had, at

for little So variability the I very has -- think past years, X had the that impact.

amount past, the of we've transportation about that's royalties. of the X/X And cost or as cash the total in cost. Yes. said bigger The

piece that piece the cost, there's takes other total. to X/X the So variability. it out smaller then variability a of whatever mining mine. of some it's of while to get is the it that just And is $XX, that, And pure of the that of

of dollar cost roughly? like guys, labor on environment an in per side like on would for variability be And the you the a ton what helpful. we That's tailwinds QX, just kind basis, had,

future The variability the in quarters?

no. No,

is reported, that at or where very structure current get cost very, your was just agreement? look had part costs like trying fantastic, a is, lower that of at quarter pricing So so to I'm the there. job cost And -- cost low, number when good been QX, how to you terrific what very a I on QX were labor labor the due of the was prior variable obviously, much and the side in

it's percentage cost. total of a Again, small the

So even just in environment like still an we a would small it had, percentage? be

Right. Right.

Instructions]. [Operator

next follow-up from Our question, BMO. from is David Gagliano, a question

have you And couple of related little I in coming just quarters? in may could a quick ones. strike. about then talk what demurrage regarding they question, those charges I the the was first more the second how and to if the a quarter transpire wondering the were just bit and

If you key on there just status at possibly are of us this still what And the sides happening issues and are give kind here? little point? a between of the the the can negotiations color two talks

ash the in China, season because ash couple there with a things. of the demurrage. bit rainy sales just little the over And in normal in first months penalties normal low higher very were Dale. the is a of the was Demurrage take have higher on one quarter. a going this of weather-related because than higher few into One, Alabama A rains heavy David, then first they I'll proportion past here. requirement. content some moisture

in penalties the were related X demurrage factors. to So primary those

tentative and the a are down just with off, on with voted pay, it's UMWA. just it's issues The international We negotiating all weekly And a typical days about always things. it's normal basis ago. month a was it the issues on the the the the reached a by we locals currently in contract, negotiations, labor benefits, what's agreement about are had contract

any are be next votes of anything that your or that sort we steps Okay. -- Is we -- there thinking should about? there up coming should

nothing at scheduled point. this No,

Matt ROTH The from Farwell, Capital. next question comes

wondering mine provide what understand X flow we XXXX. Just estimate be, what cash for an impacts in are costs the might could you can for if just the so idling

Yes.

very got and that vary. the Obviously, costs fireball those of we've have your those to kind X, but fixed continue your are has to For electricity, some mine crew we mine to a property going do like taxes, things. of small

we're to $X million million a to $X range a of So the idling. maintain in month

Okay.

So it sufficient XX liquidity the next the statement? least well to at seems fair the like Is handle strike in months. that is a

I so. think Yes,

those go we do think we our rest feel we've we I funding near-term year sufficient, several debt forward, our cash. this different million liquidity And million, And our any of adjust for have go the and is as we any pension or don't need But we'll as we our have $XXX developed We customers. $XXX as commitments maturities. alternatives with those is continuity plans of have like liabilities don't for anything significant that. of that like to.

normal your really business. just in it's So expenses the

adequate to right through we good that our So how is feel navigate with given what those commitments, these times we've outlined here our commitments liquidity now. and we're planning meet to very

no At this have questions. time, we further

to like Scheller over back call to turn for I'd Now Mr. the remarks. closing

our your That in call We interest appreciate us you again this Thank today. for afternoon. Coal. concludes joining Met Warrior

concludes that today's And you. Thank presentation.

You you for participating. may now Thank disconnect.