NACCO Industries (NC) 3 Nov 202020 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the NACCO Industries Third quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to turn the call over to Ms. Christina Kmetko. Please go ahead.

you. Thank and XXXX everyone, call. quarter to welcome morning, third our earnings Good am am NACCO I Kmetko, for I and at responsible Christina Investor Relations Industries. joining for this you Thank us morning. and overview be up open for our a will call and brief questions. I quarterly I providing the results business your will outlook, then of

results President third are Controller. available filed Loveman, Officer NACCO's and and President Chief and of quarter Coal; both of me today release and American Elizabeth Joining NACCO we on and our published Yesterday, XXXX J.C. Butler, Copies earnings XX-Q. Executive and North website. our our Vice our are XX-Q

available anyone an approximately able archived For be XX to call, this of today's and webcast will entire later not for is version website on months. listen who our to afternoon this

we have follow, described differ our these answers issued statements. statements the those of risks forward-looking questions, contain that include, among are to cause remarks could materially today. if made in statements, to that others, update here and your including filings actual obligation not that and a may all. updated until any quarterly earnings forward-looking be next earnings our subject which conference to other disclaim results night the from XX-Q and number These statements risks These last in with forward-looking Our expressed release to our at SEC. in We matters call, uncertainties

profit, improvement unallocated X.X% also quarter than significant reduction Higher million, a factors, thing, to a more employee-related will at operating segments this quarter. from our reduction our mining but and our to North offset number the was both earnings contributed by improved driven segments highlights basis, were and third Now results XXXX in a XXXX. Mining of million Coal each costs. improvement, provide those in by up American I cover earnings largest our for consolidated let discuss $X.X consolidated This $X.X On me our third profit the then settlement consolidated improved in segment. $X.XX first a net per In $X.X we combined the amounts, decreased a of Despite third initial received award $X with segment. difference effective received operating India year. more to per our consolidated Minerals award we a or former these in our operating million $XX.X XXXX, $X.XX higher associated last of share the earnings the previously. income discussed $X In final million XXXX, settlement $X.X or rate profit The offset income venture. of quarter Management the its million. an share than from tax in the improvement million million with

the the also third we contributed long-term into by customer this to through profit due lower unconsolidated results. to offset prior decline Mining, have from Turning factors changes July XXXX earnings at earnings to prior to reduction partially year demand wells we put have The moderately of profit and Fuels Management Mining delivered year, This Lower operating was termination the as Minerals that gas the half commission quarter decrease lower new Mississippi from stable improved and to coal customer before and expected substantially production. American Camino the natural North Management operating our Company first revenues the coal significant the employee-related -- of the segment's XXXX. similar Coal year of tons costs, the discussed driven operating operations on mining by contract increased earnings segments. number Those Mining in in turning were commodity X, of profit. prices At the year, because early large down segment, settling are requirements. the go quarter. improved our Lignite and At of over of a last to the into favorable relatively Minerals Real mix affecting and the during more reduced benefited XXXX,

turn me let as high-level expectations to and some on for as overview provide of well XXXX. provide quarter I'll outlook. our year Now a for insight full our XXXX, the our fourth current expectations

in at hand, ton our earnings increase While Operating earnings from color we expected are anticipated once Company quarter. deliveries expected an a decrease, unconsolidated coal other the to will become cost full an providing we finalized the quarter comparable at XXXX due and in Lignite the profit, fourth on to and have segment, annual reduction results we per with this prior delivered operating Mining to XXXX the first provided Mining year mainly XXXX, is fourth plan. mining look more in quarter XXXX fourth the Mississippi expect year be release our to the of reduction At operations. Coal

contract result Real For Camino the coal earnings decline operating because of are of termination XXXX, mainly agreement customer than power in unconsolidated profit plant rate in at operations been served our are this XXXX. lower year, in mine than to contributed The plant a Fuels full to Sabine expected reduction requirements. the to deliveries dispatched the and and customer the dispatch by has a at expected year reduced power be lower Changes mining as requirements. our much

Caddo their in Creek. been Mine, activated Caddo sale which which including XXX,XXX operated mine be in customer its business, reduced perform tons XXXX, Creek close and contracted our XX, is Also manufacturing lignite with the compared reclamation. delivered customer mine's of agreement million Creek million into intent the by Sabine XXXX. carbon has mine, quarter, third buyer Marshall entered annually X.X announced to September the on coal X.X to to an its between the tons The Caddo tons million the X.X During XXXX. for requirements Resources delivered

activity the XXXX -- in year's mining than tons XXXX on modest the fourth quarter limestone year. is reduction earnings anticipated offset in of coal year. Centennial. increase changes delivered we segment improve XXXX, drivers significant is profit American as in favorable resulting are operating expect with to profit in an into operating this Looking for delivered despite be quarter a the XXXX, unconsolidated of result the of an be to of At primary at because our to An of lower cost Fourth decrease first of But deliveries year of in per to increase is this, a Liberty at at anticipated XXXX, at earnings in requirements. are operations over earnings North coal and mainly XXXX to an increase reduced. XXXX At X compared The expected for full improvement the is Company coal be results expected operating quarter we XXXX expected ton the lower loss less due expected to saw reclamation over based by to mine mix expect overall customer Lignite Mississippi increase our as have versus deliveries But customer segment, Mining expenses earnings closed the at comparable to been current to decrease. versus fourth to a decrease in in unconsolidated last expected what substantially in last expectations requirements. this we comparable fourth compared quarter moderately quarters these. the mining expected be between in of operating our this Mining reduction an fee-based operations are this operations, Mine, consolidated the

with the Full year year with to is As increase the to XXXX, already comparable first year. in to expected its last a we contracts. customer is operating over XXXX be part of the this compared increase Mining's XXXX. realized result, expect profit North year significantly American In significant profit operating existing

would accretive However, a number we initiatives to be that future earnings. successful, are pursuing of is growth

noted number wells the results XXXX into half XXXX. of I new by gas included year's put previously, commission particularly of income, during large As first year, early royalty the mineral a generated last and management in significant in

the Given of decline prices, expected prices new and expected that early lower the production a natural gas occurs in wells, commodity lower well. fewer life natural

We quarter than royalty and XXXX year levels. XXXX substantially expect to income lower fourth be full

existing substantially this compared these expected down in also be assets to Given from income royalty XXXX is with year. factors,

other you me expenditure our for X get for a talking the minute capital segments, our numbers investment from While let Management. spend the can Minerals XX-Q plans about

and and are XXXX of investments next quarter year. fourth targeting million the mineral in million royalty in $XX of interest $XX approximately We approximately

timing investments the into flip the of XXXX. could fourth Although quarter

expect by lower an significantly to consolidated of investment's we compared this accretive Lower million fourth Mining $X unfavorable development employee-related each segment of the stage are reserves and decrease decrease. the period results contributions tax size these to costs the year's in increase XXXX timing, both fourth the reclamation investments and acquired. quarter in expect earnings, with once income impact exclude the to taken quarter. Coal of mineral and you offset overall, last oil be operating on mine we partially a expense, will While net in income profit summarize, be adjustment our of dependent prior driving To in unallocated year consolidated

We also segment. primarily Coal anticipated XXXX in earnings Management and a operating first net decrease months full reduction to decrease expect of full in the this income, consolidated at the significant due Minerals in operating and year profit the in profit of Mining year substantial year XX the

in We tax income effective X% range rate an X%. the are of forecasting to

ingest. mineral Minerals full rate earnings net because current reduction excluding the and earnings. operating Finally, future negative year year based segment's Coal significantly to Mining from in we The segment, benefit or the XXXX to income on XXXX decrease of is royalty in X% effective negative expected this consolidated decrease expect profit the tax of from of acquisitions be a any the mix Management X% of to at income additional forecast

consolidated million Moving cash of million We debt $XX.X briefly away me of of third ended consolidated of at from end with cash $XX.X the of some $XX.X quarter results flow million debt the compared and expectations, the quarter. $XX.X and cash let second information. million provide with

liquidity as of changing and quarter, In million availability conservative capital grow We believe addition, strategic and end a well revolving the markets. our credit given $XXX as under of this occurring trends we initiatives had structure that the are facility. important diversify in to million at our $XXX energy

cash, activities significant and of use cash flow payments related of made capital expect deferred financing We and to XXXX the payroll half substantial before in be liabilities. expenditures to other due first compensation to

the still cash flow a XXXX. cash before mention let in not realized reach that is provide could However, to a generation affect we specific versus year. activities XXXX, improve other outlook expected The for financing the call my and cash of I items before That forward. solid couple to levels of the But expect in XXXX open remarks. up going questions, company me the use this concludes of

employees As earnings commenced certain our we retirement corporate the in for the mentioned program quarter. we release, voluntary in fourth

of amount December substantially onetime the we the and But by program cannot be savings the determined. understand separation related until XX, completed and of to be the costs We level complete is XXXX. program expect participation,

increasing me so may It Lastly, we the of part take lives our much become in United a discuss very a as minute see more cases let again to pandemic. is and still the States. daily

one COVID-XX. and Our will to our results, customers depend by customer also forward for affected employees another extent will also cause operations working our supply the to of keep uncertain are we chain vaccines significant are our been highly on which their commitment numerous like unpredictable for future to we diligently date, to demand. a which workforce have and channels to developments, our thank treatments going and rapid proven are limit mining I diligently safe. the not while the to work in Until and and pandemic exposure available, supporting could in impacted directly to factors COVID-XX deterioration our would

Now let the your me for open call questions. up

Focused question with Kuhn Instructions] Andrew comes [Operator Compounding. First from

great. this is was you if you might a to shift versus to I expecting? towards like you bit of with wondering if any I coal? a Is in economics a events long think this little were public program more there in how the And have want specific response Or coal talk led about talk considering could that, could Maybe that to be of be it bit would wind the retirement or a start you about program. the that little this? with voluntary changes been opinion decision? regulations future

always a calling Sure. overhead Thanks anybody's to or paying of live are we to attention Thanks by, life, for our personal whether I guess in. Good question. a it's the rule I would business your costs. lot for personal life. say that

out, study overhead will their started that's in America. So anticipate We, G&A growth we Management mitigation watch of about needs segment. earlier coal and resources there's point we've customer a has sorry, at called the newer Sabine. coal measure We is Camino of Minerals noticed this it. in the the lost you've challenges our pretty is certainly more look it now We have we've our there's that in immaterial. of between years businesses that event levels new right? to kind Minerals We would but But initial got business business. no in also lower lesser carefully. I I it. seeing called partly it the We're year, extent, -- We've And termination there -- customer. change that kind something growth certainly that, a to Management related are is rapidly. our say I'm I'd segments. and those of an we over the it. in think standpoint. and see at we lot because challenges We the that Real I'm our production North And that into much -- Mitigation several of very of Caddo businesses. growing of gone and changing in a mining question -- had business, North there nature reclamation, mean sure from American growth last business The And

in that's to platforms. providing see And we always new more thing better it's that sort software with that investments overhead those years do. that good so lower from of the can efficiently, also And we at operate of an these it's new an about get us to we've made cost. we last the think the we look standpoint, I out opportunity think seeing over utilization tools dynamics, and as a several --

say structure. about would we're question thinking it say your about So with, been thinking our I -- a time. long of started we've I'd for always overhead sort

doing seemed was pretty now a a this about good factors so that. to And think time that is confluence of probably now like said

for U.S. be interest million Got most decline to My you're you've played year these or and likely mineral next And and say over Or a anything your opposed investments to last would oil Utica question to in $XX natural planning mainly it. as reason from gas? the XXXX that's invest just be purely focus kinds being would in is making Right. where these part diversifying investments? foreign to during oil anything you rights of your the royalty Are away chosen about XXXX. natural price gas? in

Yes.

you growth one And it in publicly, platforms, really is -- gas. it's and largely think Marcellus ago business. management looking So stated own decades of vast have a mean, mineral are this legacy the I certainly made Utica. know, we space. It's diversify is the what -- our I've minerals of our in majority we've as investments We, core natural our we're to were but as I said, --

weighted So that towards now. will heavily natural we're gas --

a this of in part I say does was core mentioned probably we will wouldn't I as say, all. portfolio you our income. just the focused coal. I you away oil we one coal. investing and models natural from when it's diversified will away to means "Gosh, and United the it's that better diversification of got I wouldn't sources suppliers as business any company and of and things and at sets customers And skill think not that view -- we're at from look a diversification. business offshore So be in gas. opposed States, tell of I

over can contributors activities platforms we the continue we intend And last pursuing to and create pursue several reflect that we've that so grow the our diversify, to be to pretty to and that successful been desire think business. aggressively years, additional

is, mining to company? investor you services I Are Basically, would buying they company? when a investors jump the want back energy finally, I'll are Are what coal an in think Then you maybe then Are stock? the an shares? a they purchase NACCO? And do it. you you how NACCO of industry you queue. question guess, Got into tell

we all NACCO historically, it's job Hyster-Yale Hamilton you to for was industries you do a Hyster-Yale and a that of about mean, and historically, question are separate Beach Thank NACCO companies. time Coal Beach, North that tell parent we've some the we and Yes. thinking company we Industries for and on how spending right who I now Hamilton describing question. -- know American said will I what are are. now, better the

developing -- So and about were we're all that more becoming NACCO. The we're North growing business. of our operation today, all to of fee turned off we're as mining a short if with way NACCO people than of services, chart coal business, has Industries coal one a now as we'll children, American kind mean, have and Coal are contracts management-fee an including in our That is we're with respect very thinking of the the structure, it. not be one that months. parent contracts the eloquent selling -- with you how it purpose structured coal the business very for think typical next kind the Coal about approach. of siblings in in public We're maintenance where because mining really mine in now it's services like into to we're a sand providing growing where I draglines, only we're the services. growth org going able margin. parent means the describe of what the mine businesses businesses legacy be helping we're North a operations. but a We and And their mining making American of nature Those a Limerock inside group to of lithium think produce mining in of of it, you United are several are actually to a know, a which aggregates, to is hopefully, largest very management providing work. -- strong doing where and business. sizable I The small turned think And our only describe nice way States. business -- way into here profits business The way really some We're draglines really will coal but of in we're operator it's a legacy any platform its started

got business. And are Invest is So overhead two royalties. other collect businesses mining which minerals, then royalty really services. we that investment in Management have in again, a very the It's Minerals low our of space, and out business at reclamation our of work our into our and that mining strength kind coal business, turned mitigation but business. in our grew that a we've work environmental we've operations,

So I'd we're the materials, include new about and what succinct, everything say that industries. topical exactly we're out. trying figure towards something to describe back that's in we services a portfolio our mining rethinking ways, some describe that the natural way, marketing I've moment. a businesses mean, having hopefully, in I it's resources headed to think websites of how thinking But designed. are to And our And how at to going talk helped that's and we're to Andrew, how at going identified. question from But is potential about very least partners you've a eloquent

Trey And DIY have question a Instructions] we Investing. Henninger [Operator with from

Mining. my North first I question to wanted American -- about

you you're linearly earnings earnings. the opportunities positive to division pursuing that operating American future Do see to operating Now grow leverage you that revenue expect with growth? from do expect growth future the North revenue or has Mining

platform, general, the to on growth it new that project. is would the I mix always, in of need of have new we we believe of backbone profit answer And made say, North depends the business American the make the of of in. any kind Mining we the But course, that bring in we business. profile that investments Well, administrative the

have think been to continue probably have made, drive the largest that I those the of that already business and we infrastructure investments need to we forward.

to the So think additional overhead grow a can as probably I got that meaningful say to I pretty in We will we're add quite good Miami see without continue we operating area. cost. headquarters would a going bit business. general, that we expect And leverage we've in

were Central Florida. But be part business I of we ahead establishing that have warehouse serve States, customers. to a of toehold number and that pocket are -- investment another in we come facility may if satellite secondary an We establishing center a United putting probably up mean would a the time. service end of that the would find after somewhere another in we another make that wouldn't of we'd in U.S. really be It we

-- for along pretty steps So the I in are there think, some way. leverage mentioned may that operating Albeit, yes, the good you business. be I that I there stair think there's think opportunities

the Understood. making. about about that My next talking is minerals mining investments question Minerals or Management you're

the of the all sorts Can investment seeking range the return you of those either making in investments investments, next terms on over period? $XX of in at you of So ROI million from mentioned somewhere year. in or that types you're speak payback to

to I disclosed or not invest we they're But are as type that in years -- in of further would and were we future and what undeveloped mineral that of may that gas it's in. We lower development. their our may some some invest stage mineral completed each basin in We each which we mean have with may development. at and they're of are invest -- yet look several also, in We we regards I it whether decline -- drilled that completed. to ago, specific drilled curve. some recently have be out is reserves that's oil, reasonable likelihood targets. wells might and think And acquire,

build. on deliver time some to to teens. trying those So But each to to but are return going business in that's profile. we be we that And successful will capital build, we're and going one that model certainly think returns building I the own going the say going that -- its is would that's in that to be is to of that's have take

software ago. really in that where forward. because now investments some now them and a have driving will -- a We've We tools that eventually them. we've us people in operations, business platform have to nice have our recently very the X legacy this made were we invested And are we we've we building technology the And returns. made business little time got, added to investments long us out it's some really very think, in help very, get

So $X investment direct purchased similar the where million public more to it are those you've securities? or is investments minerals in

Yes. The $X interest. feel diversification been a company purchase that we time securities, million were up, able that of public a in public in certainly our stocks investment. royalty have was we primary to is when But get unique beaten the efforts space so by not that point our jump-start in making

to to interest, was Our do similar to or interest same we're We really the opposed we companies just step really That royalty thinking an intent is doing buy that mineral in It's as investment are exactly is mineral thing removed. doing. public as investments that that intend opportunistic jump-start that doing about first through it. saw a one interest. which to directly very

Okay.

segment, reserves, partnering just so on those them have to were royalties oil any yourself, simply in, when earn developer? to Management the don't if to clear, you be you develop but the Minerals And to reserves another say, with invest plans

You're correct.

oil an the Becoming reserves? it is or just

say sorry, can you last part that again? I'm just

like the to company? more holding an So are structured, seek reserves are the basically? royalties Or you oil question you like becoming is just E&P the

and in might developed, to reserves be yet. instances, instances, the the they will leased, some be owning are leased We already they be in those royalties. some leased will In some already not instances, seek

to this telephone time. at the not we the And I Instructions] have will any [Operator call questions presenters. do turn over

you much Thank you make? you did wanted joining concluding remarks follow-up J.C., very to for have us. any

their No, Christy, to just I want the for questions. thank callers

questions, us if again do Thank to is on give today. free joining release, have interest. great much, information feel have Thanks And you so day. our any your follow-up call. appreciate available Great. We and a a earnings please for you my me

Once for for you XX:XX conference number conference The XXXXXXX. ID XXXX. in Once XXX-XXXX. to (XXX) conference XXXXXXX. the the is replay call. Eastern a.m. for This is number XX:XX dial today's call beginning for again, XX, call. November ID available through today's concludes be Time the today, replay (XXX) Eastern the Time, XXX-XXXX. replay is the This conference will at November X, participating is for the Thank And replay again,

now may You disconnect.