NACCO Industries (NC) 6 Nov 212021 Q3 Earnings call transcript

Hello, and welcome to the NACCO Industries Third Quarter Earnings Call. My name is Elliot and I will be coordinating your call today. [Operator Instructions]. I'll now hand over to our host, Christina Kmetko. Christina, please go ahead when you're ready.

you. Thank and XXXX everyone, call. quarter to welcome morning, third our earnings Good you morning. this joining Thank us for I Kmetko, NACCO Industries. am Relations Investor Christina and I'm for responsible at

website me XX-Q. we call webcast. months. published Chief this third available quarter website. President later Loveman, Joining Today's and is President is our J.C. The filed available for results be and our our Vice Yesterday, being Officer; on information and webcast Elizabeth and XX Controller. and XXXX are today This also our Executive afternoon will approximately Butler, on

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

let me Butler, call remarks. website. I'll J.C. quarter opening the and discussing moment, be addition, discuss But a turn we release we performance. useful believe is evaluating information on J.C.? In will the first, for In to third and non-GAAP non-GAAP in some measures our earnings our found our that these in our Reconciliations operating over for CEO, President company's can be results.

morning, good Christy, you, and everyone. Thank

very The strong third another XXXX quarter quarter for us. of was

of to a benefited payment $XX.X earnings as self-perform. a quarter NTEC's result million third from decision Our

the to able to Mine. has and at NTEC the opportunity the just core of approach I for the managing control at improve work proud NTEC that partners, works customers am the to mine. mine able of They we level I'd with coal at and X, our add were at our Navajo the proven mine, we surface our the being operation of work. operated the the operating and quality the everyone for October to Navajo are and and though have work leaders responsibility at I'm applying we were safety the that By who environmental to quickly all Nation. I power work the support thankful the people while to and great we and things required and and the of we're to These did reclamation plant. improve done improve proud of for people do, Navajo what to am mines, Navajo very of bring that and unique Mine, As assumed value the service own

prices and our pleased settlement Management the by helped termination our quarter, of and Turning Earnings increased income Minerals that had payment. quarter, significantly, our natural I'm our to interest. oil report Bisti gas newly in all higher mineral In back particular, earnings improved segments. outstanding income, part to even an acquired segment from excluding at

as mineral Mineral Our XXXX our Partners quarter our continues third while mainly strong quarter Mining oversee the contactual actively operating interest, price segment, -- demand. team look for an the Catapult resulting termination profit the as unconsolidated royalty operations, over increase of and in performance Mining due portfolio Coal from at well opportunities escalation earnings mineral to owned payment to improved expand Bisti we and Coal from contractual of In prior year to of the interest.

increased, down to and on facilities power cost provide dependable power gas are natural generation baseload companies coal and As low increasingly electricity. more and generation shut prices more are relying

gravel quarries our Texas work goal American and Mining. We've scope geographic American third and as North delivered in and the Arkansas to North Turning located deliveries Mining expand quarter footprint. on new in sand to began of X we at

We coal mining at mine and conducting lithium do these the are all operations mining our do as in operations in Nevada. will just X at quarries, we

like At said skills As a project Americas, of a there's or that this wide can Pass update customer Lithium mine time, begin also mining on are in first and experts early early or the Mine, remain in we range experience projects of Pass apply noted Mining's potential business pipeline is half provide and American note final before, services whole in strong. company I've quarter lot quarry, an permitting entire of the of an operate to of to first growth received they works expected XXXX, I'd to decisions to October. the XXXX. We expected mine that in decades Thacker Thacker can to of issued and our leverage our new construction at that minerals. the of be specialized a North in

provide pleased to development projects of project. these they their advancing to new forward with At support with are continue coal the to their of America midsized existing interesting of advance of and projects as I'm mitigation fee number to maturity, as well. a a really fee is businesses management way continues The is team income North evaluating strategies. line. very all this contract fee management resources similar We this deliver move expected mitigation

diversify. not note Station I first of termination to will receive ownership to XXXX. the should the Presently, closing the us. GRE other certain the Creek assets a terminate, I long-term Rainbow expected in and I'm turn the previously has transaction. Center strategies business businesses over of I is teams our would and transfer believe back to We can and agreements on we the to Once have detail. grow how to look forward to completion lot continue to announced that, strategies sale that in cover of sale a by strong I Christy business complete, strong payment this continue of about quarter occur to executing to that confidence bringing GRE between yet we for and Falkirk optimistic our $XX core call have very grow resources million the will our sound outlook natural the quarter to of Coal enthusiastic Energy protect I closed. our be more is because results with and life. Lastly, GRE existing from With about will to in GRE's we

significantly, income Thanks, million income or increased the also then $XX.X J.C. per from was million On or start basis, Consolidated a $X additional fees, year. of $XX.X with from in detail third million $X.X improved the $XX to at million $X.XX and consolidated Consolidated year to $XX.X driver to and increased last in A net quarter. our $X.XX segment discussed. J.C. quarter XX.X% million third I'll million per results rising adjusted profit profit termination XXXX. fee, provide quarter which $XX.X increasing million the in operating share level. operating the consolidated prior EBITDA, excludes from large termination share increase the net the

increased resulting contracts. at as operations, payment In As Mississippi expense, significantly unconsolidated amortization operating J.C. to result operating were an increased mentioned, increase operating segments, equipment increases operating results earnings in third increased profit of the increase offset to termination excluding profit at by in all expenses. Mining's Management the excluding a as from expense depletion Minerals improved significantly acquisition partially of my segment, American segment contract fee, most higher company. in Coal our an well due primarily Mining in as the newer depreciation improved our segment. by quarter year, depreciation, adjusted Segment driven on and over due support EBITDA the Lignite these XXXX X additional prior EBITDA improvement North primarily to the primarily

Permian contributed and our improvement settlement to part Those operating interest gas current by Mineral this discussed, mineral income results. income higher significant and quarter already Management's prices. adjusted acquired significantly profit J.C. the earnings. by quarter were Shale the higher third extend Management's increased production segment the to million for improvements Royalty geographic prior in from affecting recognized Minerals in the Ford $X.X increased and natural and royalty driven year. Eagle the and the quarter driven As Basin also footprint factors as oil over These EBITDA of strategy are of income

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

and first release, once Mining While look million Mississippi costs included the to year program year this segment, over XXXX, profit operating loss and have Lignite we provided are because In operating providing quarter Company's coal XXXX finalized fourth Coal we with Mining earnings asset increase inventory totaling plan. significantly impairment. operating voluntary the be charges XXXX will expect the prior down annual an and our write color $X.X separation to fourth associated quarter prior with year the the we at full more

decreases impact the quarter these coal consolidated of from operations expected of year profit a XXXX items, XXXX Mining be absence is fourth fuels. to to of operating as beyond operating by prior reduced decrease significantly expected mining Camino recognized the Mississippi related earnings Excluding costs of Lignite Real at result and anticipated to Company. are lower offset expenses in These the partly wind-down in

payment impact to and we full excluding various XXXX. be costs increase fuels. deliveries, of operating Centennial For mainly in than a at Camino with the deliveries as the year, Despite performing Coteau fewer reclamation Real expenses mine XXXX the charges, Creek, $XX.X the absence moderately after expected million lower XXXX and is associated with associated the coal the termination to income a of expect of profit closure result reduction at even of

last increase full this prior Excluding depreciation, the impairment termination to increase for periods asset we fourth recognized as year result in fixed amortization the depletion a of expect and the and quarter EBITDA expense. received respective segment year, over operating and improvement an and the adjusted profit year payment year charge

Bisti to XXXX, we anticipate as into expectations of from result deliveries coal the a levels Fuels requirements. of XXXX decrease termination contract customer and current Looking

the we expect adjusted because payments, respective agreement from delivered XXXX, driven in Falkirk expected the mining over to periods, be as In expected have to into to anticipated at an year reduction at the Segment during Mining mining earnings anticipated entered in XXXX XXXX full to from XXXX. from the EBITDA to increase of the After well higher Termination excluding profit per prior levels anticipated reduction termination the profit line the earnings operations consolidated and quarter an earnings increase over the per Mining year North GRE because $XX respective operating and profit in decrease a significantly XXXX the decrease Mining, fourth operating fee in in with American with in increase other significantly year. as at ton thereafter operating quarter increases increase this Fuels expenses. contributions in agreed significantly in we is compared production, of broad depreciation The in a customer North by operating coal lower measure to to inflation. as year also adjust according higher next requirements. reduction an Fuels well primarily we significantly as index, for EBITDA, significant of XXXX XXXX periods will unconsolidated the adjusted year to expenses. At from in expected of of tracks the Segment of profit prior expected U.S. payment by America new partially reduction XX, improved tons contract from mining the date unconsolidated is termination management operations the operations operating the North offset base NTEC Bisti due increases year increased a to fee and increase expense. decline year the management as result the as Bisti contribute annually full May profit. XXXX, mainly and the received Excluding fee the XXXX, from expects payment contracts ton the million unconsolidated which of earnings and coal an a coal operating of and in operating to expected fourth coal full effective expect and GRE primarily mining and currency because sales May expected of in through to in forecasted American is

the million impairment in which $X.X Management. Minerals segment charges $X.X Last year, million the totaling recorded quarter. to were taken fourth of Moving

profit decline fourth operating XXXX the the Excluding newer Mineral adjusted quarter to decrease we charge, certain due EBITDA wells quarter fourth Management's expect and curve the Ohio. to of primarily in natural in segment production

EBITDA recently and including and adjusted result from of income segment prices. gas royalty last this We oil recognized expectations and adjusted from million and by profit income mineral and and for production charges be to decrease to year, in interest Ohio, are of significantly expect from full profit increase settlement in declines prices we reduced decline and primarily higher a the the over the natural driven prior the absence lower Wells XXXX, generated XXXX. of oil segment operating as market to year. excluding year gas impairment expect EBITDA natural These acquired curve XXXX of operating $X.X In expected addition year on

charges primarily year because XXXX basis, income and anticipate totaling EBITDA Our summarize, a million. on and the year with expectation a consolidated the adjusted quarter and oil gas of year, in over fourth current stabilized $XX.X absence at consistent significant is operating To expected increase prices profit, prior levels that full consolidated XXXX last of market moderate averages. in we in consolidated net

charges, those we year operating in Coal the lower profit from results increase the by segment. and an American partially North consolidated XXXX because is Mining Management our fourth in primarily segments offset to Mining decrease Excluding expected quarter anticipated prior Minerals

prior to net than year, expect Bisti of of as higher last payment million. full $XX.X year year For and the income Fuels termination be result a totaling we charges the significantly absence

consolidated still income the expect in all in from strong Minerals of anticipated and be tax because adjusted X we items, significantly the Mining Management net XXXX income the of partially and results we expect net offset are income In Excluding XXXX. the segment year. consolidated XXXX, first this of an these higher months in segment earnings to decrease expense. in to earnings reduction lower by EBITDA expected significantly Lower Coal

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

under had facility. our of availability million $XXX.X we addition, In revolving credit

probable in We we year. agreement. revolving of by status, this end our current process the will of credit refinancing that are is on it refinancing the the complete Based be the believe

flow substantial anticipating year a use XXXX XXXX. also are as significant cash the compared financing in before full We cash of to activities in

we XXXX, to substantial to a use due to the in in earnings. expenditures However, capital reduction cash return significant and of expect forecasted

have. turn any questions now to you will We may

Instructions]. [Operator

question Andrew Compound Kuhn from first Focused Our from Management. comes Capital

you is how you at dispatch are is, guidance? say gas assume earnings, gas the at to coal question to sensitive commodity I you first natural my So it And price plants? was curious, both giving because most would decide on natural affects when do what and royalties Minerals power price Management

that the the your you yes, certainly want Thanks to? utilities affect way other sensitive and is I outages fleet does very -- including plant specifically business, gas. about question. if dispatching thing the for natural their that about of want mean, a power planned the if unplanned of mean, question to about resources. most things. timing it number But you talk was we're specific it are things our There I of and drive is think

reserves prices in I tied we to -- seen significantly legacy majority think that the coal have are natural high contributed has to gas that Ohio. it Southern Minerals have the our benefited our and from also natural for gas Southeastern are our assets segment increased oil And in gas customers. -- business. of The pretty demand

is when Your we're assumptions. part what of do to -- making question second your we look

take to general, be because I think in that the we for view XXXX. and we're of rather what We how forecasting. we'd be are assumption appropriate to shouldn't I as conservative manage an tend prices of operate average we probably we think sort In pretty like ours in we to conservative going to release, think our about to a risks going said so moderate that return an taking. that take forward and and going don't overconfident it's probably industry become is

natural much gas so stay far, least I if pretty a future. XXXX, are beginning spot view year. go conservative they the for average it course, what of happens I'll could outages, I that, results into the as we've year higher back say and current answer into individual depends for the look know related that think the Does on on and primarily rest to than prices, at see certainly, the of question? think about. side, we at the And taken better the guess, I of So next the prices we But power coal to with unplanned planned outages, plants which we your

more. Yes. in fuel at could expecting companies becoming to banks? you No, to fossil difficult due if you lending availability it's have are more borrow. does. that changes speak curious, I just Maybe new And to coal any couple a credit then policies I'm for

it that or -- they've time, all see any reasons and banks get Well, certainly you isn't to energy, to they're for away coal from going fuels, got companies out And to own they're doing we gosh, all borrow. all for see their the fossil of steer easier decide that. that going

I Some, the politically they've by driven, had past. I think, are possibly that some credits troubled are in think driven

of the continue with time, So they banks mix over to we and certainly that work changed change. have

a to terms, certainly it working borrow. now. for As We're on refinancing possible right is

quarter able I'm to of able that the team end it far, the And -- to expect lenders. least completed be so we the pleased during we're out before terms year. We were to -- terms work with the the this at with that

that's to the markets probably say status of would relates what as think about the I I lending us. to So have it

business this in usually bit going then the back the jump a million mitigation CapEx things to queue. CapEx kind I'm What at talk little then before? you can resources? it. $X in Got in And will about of And

question. good Yes,

mitigation an for sort accounting thing. interesting resources is the of So

mitigation property, treated property that on to develop and actually a inventory. money the process As piece work in it of spend bank like more we acquire is

So into -- do CapEx. to will inventory. a enhance coal acquire investments American operation. from us to It's work we're really It's is core part taking thought directly what resources what do as that The our building dirt to mitigation banking returns to the on mitigation actually equipment not It's on Mining. credits mitigation CapEx that by And actual that It's skills of that intend mentioning we're we banks. we're we just on and expanding making North our we really mitigation here in dirt used them of for are be some is that do resources at business. skills. related financial the those mining work

$X that we related referenced the So question. a It's is to good Thank there million very That's equipment. good. you.

Instructions]. [Operator

[indiscernible] from Our from Energy. [Kanfer] next comes Donovan question

Great quarter.

couple Coal an should what's at if coal Can termination of in few you you former Creek, Falkirk. we a agreement new under just of provide questions. specific -- And -- early had the think of management of potential for contract. news the that color a Just a sales the great the you about on risk earlier that plant little again the termination early about Can how years? closing

things how and that they -- a think about Energy that different intent question. like plant do and -- and at viewing company Rainbow a utility And least conversations this that. of sale and produce like are of business their new would much would in which very the with They're had were that -- a good they're all run involved marketing produces the revenues valuable making in available plant. a electricity It's a successfully do The factory. bet And the Center capacity manufacturing that Well. parent the can company in at owners, that the very would co-op thing them, -- involved plant They're from plant. is particularly you that the the a future. to viewing they're operate we've in factory than leaders in that capacities, in capacity, particular, they they increasingly that way are high into a they're are if very business, the and or electricity low-cost like

read there are about there business risks, that all regulatory newspaper are political there day. we are Now every risks, risks sort in plan of

to that for risks environment add, of very and we're and how it transition out I really thinking going we've and are could that steps exciting know because I really transaction I'd plant going really don't through I the upon see it's like ability and this forward looking is this about dependent And hasn't conversations to I the their approaching This to closed had to think final my specific regulatory their expect what the plans that's you, a So about in we call that year, will business see what with we for how plant? model. business think course, tell when they're we're energy part they're them, point running that the this happens. of the next forward. yet. that close in first current the something

will be and it and mine. a the coal think I community great for the thing for plants for certainly the

Sure.

arrangement at arrangement? understand years a cost subsidizing I about to partially at should this do below-cost is of Is management an contributing a that? with that value to the -- that in so Is subsidizing some how word, the is wrong And new we this think and And is but arrangement? -- it. fee that effect NACCO lower early

Okay.

and to question, address I'll that So X X parts the first. second

cost. is fee reduction think our in we quarters what now, what our for we've we have agreed is a it capital, earnings the today for and below we do. fee which is I cost we done the fee. as couple well that that a the work the and a a And that management the means pays is said provides customer all Remember contract as after transition, You receive this in described to release, of XXX% of

operating and have in right would well, a it's say, think fee, okay, that of able of need other a as parties to fee. subsidy So the was in In probably what doesn't I this earn don't is costs. getting X My coal you decision, in the management subsidy the not really done, word. any equation true deal to that wouldn't in out, is potential said this many first reaction I course, done. that as these a of below many from pointed is, you all mines we ultimately apply it about being cost We concept the any because our when done. we transactions, thought participate get deal about to deal lot we, order ways transaction the And evaluating we for get to were and giving were up. of future is a that a help what the

Given transaction completion good the to support said, for great the power It's we I great for our it's that employees, time. view not were do make it's we're in to the just like fact, for to we going for its period like fee, we're and less with consumers. And situation, management for that a community. okay plant. able pleased it's were We great to that. XXX% It's a it's of be losing Certainly us. of a because in as happy

retirements Mississippi is what's looking go that? could to it we Mining's do understand a about where basically Mississippi a One provides optimism I and off reconcile And worst Are to helpful. help worst there case lower Trying me think scenario? now to scenario around case with question, appreciate the the in prices for persistently really That's more if Switching uplift baseload patience. customer. at hearing and broad your that? capacity in minute. NACCO's And I'm factors that lower? the gas the to to -- and the right from contracts over reconcile demands How how I

resource exactly so of the gas mean out right? that of be natural TVA. of been about year, Certainly, scenarios, Red it's running is it's but well. supported to has high running believe. prices to power been important are will hard It generation part had that's Hills believe And issues, of know what an the don't that level Certainly, prices proving in help I mix this I have plant the it's and increased those. the dispatch, mechanical worst-case dispatch historically, some increased Because I plant natural with plant. well that think far we that gas serving

plants in power built including benefits a at it that level. high think run These are to plant. plants I general,

allows them to gas So having them higher natural high gas these issues that plants ramping down ramping affect mechanical at means prices them, there's which cycling a can because higher dispatch natural availability. -- that less causes up, level, run

been in running helpful, plant it be at and the would I the level during has future. having higher think a year So the

scenario, I is Your guess, But I they've question developed plant worst-case see about some down. happening worst-case that the regulation scenario whole now. I mean that of that shuts right kind don't

I -- which operated agreement, not purchase this I purchase TVA a as views power think -- be it an agreement. would think asset, as is is it a power

And of that arrangement independent runs contractual an so it's kind XXXX. through

fleet, continue think least it's operate the as So question? I of period Does through to part likely to at that of time. that your answer

so additional Appreciate details. the much it. you for well. Thank all Very

I team remarks. will management back to for any now questions. closing no have the further hand We

did you much. anything Thank J.C., discuss? want you have to very you

Christy. else, Nothing Thanks.

becomes close Investor website All We'll be final call available a online will of right. also Thanks, morning. J.C. with our available. the it transcript when reminders. post few a on A Relations We'll this replay later

have you reach please out to questions, If me. any

me great on a day, number the hope I reach can and press it available the You at you phone Elliot release. back have the will I to call. over conclude turn to

of concludes The be will conference. the available call. conclusion X this hours audio Thank This you. after recording today's

You dialing it XXXX. using be November X-XXX-XXX-XXXX available may XXth by will by Playback access of until the Thursday, XXXXXX. and