NACCO Industries (NC) 3 Nov 222022 Q3 Earnings call transcript

Hello, and welcome to the NACCO Industries Q3 2022 Earnings Conference Call. My name is Lauren, and I will be coordinating your call today. [Operator Instructions]

I will now hand you over to your host, Christina Kmetko to begin. Christina, please go ahead.

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

me Chief President Loveman, Joining President J.C. and Vice Officer; Elizabeth and Controller. and are today Executive Butler,

months. third our later for we on will and filed is Today's be The this webcast call available is on XXXX our Yesterday, quarter XX results website This afternoon XX-Q. and approximately our information webcast. our published website. available also being

remarks answers are contain to and Our including from forward-looking in forward-looking statements. actual a risks those could follow, your questions, materially the cause statements that to of to could These subject uncertainties made differ expressed results here statements that number today.

that release next until our described forward-looking our update at all. matters we statements, SEC. and with in to may These have issued updated conference and night disclaim not risks earnings our other filings call, We these if quarterly which XX-Q earnings the among in last obligation include, any others, be

release In we will information our can is the on results that evaluating the in Reconciliations we operating addition, our will website. I non-GAAP performance. useful in earnings these found our company's non-GAAP quarter. be be a for measures moment, believe In and discussing for discuss

opening me J.C.? call first, and over some the Butler, turn for remarks. But CEO, let to our J.C. President

And Christy. you, good Thank morning, everyone.

exceeded in our Our third Minerals specifically year, and while expectations, segments. last results, Coal quarter from down Management our Mining

those are the it see underlying but from of third our the On operations. making quarter profit decreased that difficult of operating XXXX, skewing in are items results the there the and to the net both income comparison several surface, numbers

let overview our more at highlight earnings Christy of me each quarter minute. detail of the segments. first, But about an our will outlook we progress this in go made a our provide and into

XXXX increase a substantially Once but EBITDA, in better prior of Our results. segment operating profit Minerals success the a over improvement Minerals grow much importantly, wells in gas oil its is in as Management continued and showing more again, efforts which on in Minerals is increase prices natural diversify. from higher increase and XX% to did year, indicator drove segment new also company underlying reported an in leases. Management production the its team adjusted Management

During the of mineral portion of gas manages River of Basin. the approximately the which part royalty that an our This this completed acres Catapult quarter, Basin Texas the segment, Mineral XXX Partners, the oil Powder Wyoming gross in the acres. business and of $XX.X portion acquisition million includes net and Permian is acquisition interest and XX,XXX

continues to up mineral Our for to $XX and attractive team look royalty at million acquisitions Catapult interest XXXX. in of of

in gas prices XXXX the oil In moderate our XXXX line assumes levels forecast Management and market in segment, will with to averages. Minerals

As inherently natural increases prices and we've improvements oil to in current throughout seen XXXX, above in volatile expectations gas commodity result current prices forecast. our could XXXX are and

future reserves of accretive results. could be future development addition, In wells the to existing or additional on acquisitions

plant operated decrease in to tends to the power higher continue This Mining prior the the than quarter at the Lignite higher were for our Total and retire so customer was can the than projected, due a I to and owner price should by than they to Mississippi we Lignite coal that we Mining Company. produce requirements an year and anticipated. work note Company level decline XXXX. plant plant we served existing Mining At decreased. increase less to continue this Mississippi agreed-upon of over anticipated. expected Conversely, our that Coal power was the power diligently energy. segment, Coal increased revenues reliable in and sales support Mining affordable customers contractually earnings

in cease of time Sabine at XXXX, expects at begin deliveries the assumes Sabine final forecast which first reclamation. to quarter Our

and ongoing regulatory the funding plant use responsible of closure customer industry of source power foreseeable the electricity for a mine and Our States believe continue fuel for Despite for coal challenges political reclamation. as United faces, will the in the we announced continue the to future. is coal mining the

North do program those third retirement more had rose, eligible lower in was quarter. Mining a program early focused operations The charge operating the we as during recorded reducing implemented this decision. employee rightsize Our an type level. an employee-related is a never and costs American on voluntary of of place program to we profit segment easy retirement as and voluntary $XXX,XXX XXXX the in so for quarter allowing to costs by retirement appropriate our Putting for

of our employees long-term part were important our are very of and these of an employees. team, many All

As a American expect we Mining benefit from to program, in result savings of the cost XXXX. segment future this beginning North

steps note our North Lithium like operation project. provided Pass all an key Lithium to in Americas and continues closer on permits to been construction level part XXXX. update have is them begin XXXX, of to that issued of October bring segment. These Mining Americas expected I'd start-up American progress the also In project. state This the is noted that to make of Thacker this

Pass project. work with they to continue the Lithium We Americas closely advance as Thacker

these towards all mitigation advancing XX progress wetland strong provider pleased be the stream and currently projects interesting Southeast to businesses work mitigation Overall, their of of developing goal making Texas mitigation The United a new and is to North and its XX responsible America Alabama, project are projects. very Mitigation in Resources Mitigation top the development Resources States. on I'm existing and in strategies. Mississippi permitting services Tennessee, way banks is over mitigation several team of of continues and with

transaction the be end mention to investment finalized business. a AgEnergy in finalized where XXXX. of other said, turn back assurance announced Christy, be want that Last We time a one ethanol to Midwest AgEnergy, agreement anticipated at the before call the their it I I to with all. there NACCO, close week, Before frame that This Midwest minority sell its North is cash. including Dakota-based transaction can holders, interests an for item. hold That in equity or will the expected no

As such, we we on our each not Because proceeds the be the do the results estimates. the receive to transaction. this have XXXX will amount quarter, terms timing we dependent sales value will material investment based on expect of adjust of of current cash on the impact a and

the I'll that, detail. call for With in turn to more cover results over the to Christy back our Christy? quarter

I'll covered J.C. and for our by year. the well fourth year on expectations not additional of and high-level XXXX I start for the results already J.C. full quarter of next segment insight some the overview provide consolidated Thank quarter level, current expectations you, for at provide the will the then third XXXX with as detail also our as

the this consolidated profit $XX.X plan. from XXXX. first annual provided basis, will per year. providing earnings million $XX.X share operating On are be we $X.XX have $XX.X our look, color million our Consolidated year-end operating with release or of million a million share once $X.X or more third per decreased also While our XXXX finalized from $X.XX we declined in to quarter to diluted net income diluted last

of are to the compare million quarter. As several difficult items driver periods. it make largest in $XX.X The between J.C is between that third periods decrease there in earnings mentioned,

segment quarter and as of legacy a retirement the coal Minerals addition, discussed. XXXX related result of write-off J.C to program the the a reserve $X.X third a million $XXX,XXX charge charge that In includes of Management voluntary at the

primarily Consolidated AgEnergy. in which by expenses The employee-related adjusted and Mining from higher lower quarter. interest moderately fee, the impairment Midwest and third million improved segment Minerals and charge unallocated driven our EBITDA, offset the to termination was decrease in $XX.X excludes in in $XX.X contract Coal earnings by from the earnings the partly decreased income Management equity million segment

a segments. of discussion to our Moving

Mining per the significantly decline Coal prior to Bisti in operations Mine reduction earnings management and ton termination the in at Falkirk due of business unconsolidated Excluding fee a year the the Fuels contract. contract, of because a of decreased

Substantially Mining already quarter segment's primary Coal EBITDA. XXXX mentioned, the increase of contributed Lignite me an North on in in focus third let of and the segment so also to adjusted impact lower on the drivers from Mining earnings at the costs Company results, inflation J.C. the decline. American resulting expenses operating Mining the decrease Mississippi

decrease segment was because less of mining operating depreciation was expense American year from Mining's results adjusted the than last profit of active the EBITDA excluded. decrease in North The operations impact in improved when

third quarter a EBITDA as Finally, and operating segment of result and in oil adjusted profit gas segment Management increased XXXX the production. increased natural prices and higher Minerals

years to depreciation profit operating EBITDA continues in to is Looking with modestly, operating the forward, year segment at associated Company expenditures recent capital affect comparable prior increased fourth at adjusted were EBITDA quarter quarter. profit. to Mining improved Mining primarily due Segment expense increase expected the be to to Lignite expect negatively Mississippi Coal we

and Coal decrease payments both the from segment result Mining For EBITDA of XXXX, XXXX moderately contract adjusted excluding reductions customer recognized we to at the deliveries because X year, and operating the profit cessation expected decrease earnings coal requirements. well first Coal Sabine full expenses the both of expect as received. of in and expect higher to of first in consolidated the are The Mining primarily expected XXXX. of significantly as unconsolidated the reduced and expectations we operations months current quarter including operating termination XXXX, the In levels from deliveries XXXX

an compared the XXXX operations decline management in reduction full all including adjusted are Coal the XXXX result Falkirk Mining and by received the anticipated to consolidated The in at XXXX, Mining earnings operating expected an for termination reduction significantly driven is the XX million significant decrease per with $XX and earnings months Lignite segment profit with in compared primarily GRE X in in Company fee on at for year year. this and decrease of the XXXX. Mississippi payment EBITDA modest months expected ton excluding

to quarter according levels the that Falkirk cease inflation. at management of per as The of a well U.S. measures fee Sabine at mid-XXXX the and will to annually tracks XXXX. an increase broad return first As assumption in prior in which ton index, deliveries

fourth delivered adjusted of existing At increased earnings in the we profit operating under expect and anticipated North primarily and segment Mining including because Mining, contracts. EBITDA increase the contracts, to American tons Sawtooth the quarter

for with effect increase full full North of charge and the American compared quarter segment the over the EBITDA to XXXX. the charge. the for the is We voluntary anticipate including year, retirement increase Excluding significantly XXXX expected retirement program, operating to year prior excluding year voluntary adjusted third Mining profit

and segment EBITDA in due North increased operating from voluntary American profit full Mining's operating reduction due program. XXXX, adjusted operations in in a the costs In employee-related results part active resulting from year and to retirement reduction mining an expected to expenses

and driven and anticipate Finally, by EBITDA current over segment XXXX, new fourth prices current profit primarily natural production continue segment, lessees. primarily the increases are XXXX oil Minerals adjusted segment year, prior by by existing from development for EBITDA gas increase and quarter and prices as and full their to and volumes. at and for additional the year we market decline our natural significantly and of anticipated both forecasted expectations in expectations adjusted operating expected reduction follow production wells year Management natural to in oil in gas profit volumes in operating decrease respective limited periods to third-party Conversely, this driven wells

in As in XXXX increases consolidated we J.C. EBITDA results. and in increase equity XXXX Midwest profit, basis, current significant result in income the AgEnergy prices To consolidated natural as gas well above on improvements interest. adjusted quarter in net income our summarize, and as expect our expectations a oil from of operating segments fourth consolidated mentioned, a to could

full and to the expect we income year, recognized excluding consolidated with this settlement termination and Energy GRE/Rainbow profit, the recognized EBITDA transaction improve fee year, associated the net consolidated the significantly XXXX. For over operating adjusted last XXXX year,

we forward, largely income contract termination million XXXX. to income of expect in $XX.X Looking recognized of XXXX, consolidated significantly, decrease net during the pretax because

North the to to our income, significantly income settlement expected as income interest. expected substantially Management from be and the in offset Mining Excluding reductions Mining results expense Midwest anticipated segment AgEnergy the These in an reduced by are income Coal reduction lower American royalty Minerals is in decrease improved partially net segment. tax lower the earnings in segment and from income well as

Lastly, million. from with the a cash quarter liquidity of ended $XX.X $XX.X consolidated standpoint, debt of million we and

In revolving our facility. addition, million credit $XXX.X under

year we For than before significantly full be capital last the higher flow XXXX of year, lower cash to activities expenditures. financing because anticipate

cash expenditures forecasted a decrease substantial addition, XXXX income, use an of of in we capital In net expected anticipate because XXXX. and significant in

turn questions have. We will to now any may you

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