Warrior Met Coal Q4 2024 Earnings Call Transcript

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Provided by Quartr
February 13, 2025
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Operator

Good afternoon. My name is Wyatt, and I'll be your conference call operator today. At this time, I would like to welcome everyone to the Warrior Fourth Quarter twenty twenty four Financial Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

Operator

This call is being recorded and will be available for replay on the company's website. I would now like to turn the conference over to Dondre Wright, Vice President of External Affairs and Communications. Please go ahead.

D'Andre Wright
D'Andre Wright
Vice President External Affairs at Warrior Met Coal

Good afternoon, and welcome everyone to Warrior's fourth quarter twenty twenty four earnings conference call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward looking statements according to the Private Securities Litigation Reform Act. Forward looking statements, by their nature, address matters that are to different degrees uncertain. These uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC may cause our actual future results to be materially different from those expected in our forward looking statements. We do not undertake to update our forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.

D'Andre Wright
D'Andre Wright
Vice President External Affairs at Warrior Met Coal

For more information regarding forward looking statements, please refer to the company's press releases and SEC filings. We will also be discussing certain non GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our fourth quarter press release furnished to the SEC on Form eight K, which is also posted on our website. Additionally, we will be filing our Form 10 K for the year ending 12/31/2024 with the SEC this afternoon. You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes a fourth quarter supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walt Scheller, Chief Executive Officer and Mr. Dale Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer any questions. With that, I will now turn the call over to Walt.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

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

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Looking at the fourth quarter, we were pleased with how the company performed despite the current market fundamental headwinds. Our strong operational base continued to differentiate Warrior, driving sales volumes 23% higher and production volumes 7% higher than last year's fourth quarter. When high quality steelmaking coal prices recover from this past quarter where they reached the lowest level since 2021, Warrior is well positioned to capitalize on improved market dynamics. Looking back over the last twelve months, the company had a very successful 2024 as we met or exceeded all guidance targets, achieved sales and production volumes not seen since 2019, recorded the highest annual production from Mine 4 and produced the first tons from our world class Blue Creek growth project. We generated cash from operations of over $367,000,000 which was used to both further the development of Blue Creek and return over $43,000,000 of cash to stockholders via dividends.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

I'd like to thank all our employees for the successes we achieved in 2024 and congratulate them on delivering strong safety results. The safety of our employees is and remains our number one priority. The current state of steelmaking coal markets provides the backdrop for our recent performance where low prices continued from the third quarter into the fourth quarter. In fact, the markets became weaker over the entire year, reaching their lowest points in the fourth quarter. The primary factors impacting our markets continue to be driven by a complement of three factors: excess Chinese steel exports into our customers' markets, weak demand and an ample supply of steelmaking coals.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

These factors impacting our markets appear to be well entrenched, persisting for the entirety of the fourth quarter and into the beginning of twenty twenty five. Our customers remain focused on cost control and profitability due to low global steel prices and thin margins negatively impacting their results. These market factors, in addition to the ample supply and availability of steelmaking coals, have kept all of our pricing industries under pressure and have challenged our profitability. Prices at these levels are especially challenging for other steelmaking coal producers higher on the cost curve than we are. Even the recent mine fires in the sector have had only an insignificant impact on seaborne pricing.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Our cost discipline continues to be a key differentiator for us in this environment. Our primary index, the PLV FOB Australia ended the fourth quarter at $178 per short ton, which was $7 per ton lower than the end of the third quarter and averaged 184 for the fourth quarter. The PLBCFR China Index ended the fourth quarter at $180 per short ton and averaged $193 for the fourth quarter. Similar declines were observed with the Platts LVHCC Index for a high vol A product sold primarily into Asia, which ended the year at $141 per short ton. We achieved a gross price realization of 86% for the fourth quarter and 89% for the full year 2024, which was a function of product mix, geography, tariffs and freight rates.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

According to the World Steel Association monthly report, global pig iron production decreased by 1.8% in 2024 as compared to the prior year. Pig iron production in China, which is the world's largest production region, fell by 2.3% for the same period. The rest of the world's pig iron production experienced a more modest decline of 0.7% for the full year. India remains a bright spot with a growth rate of 4.4% and is expected to continue growing with new blast furnace capacity expected to come online this year. Several other regions also experienced growth for the period such as Brazil and certain European countries.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

However, their gains were offset by declining production from Japan and South Korea. Now let me turn back to our fourth quarter results. Importantly, our strong sales volume was driven by better production volumes from the existing mines. Our fourth quarter sales volume was 1,900,000 short tons compared to 1,500,000 short tons in last year's same quarter. Our sales by geography in the fourth quarter breakdown as follows: 38% into Asia, 30 6 Percent into Europe and 25% into South America.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Most of the sales into Asia in the fourth quarter were to customers in Japan, China and India. As we've previously noted, demand from the Asian steel producers has been growing, resulting in higher sales to that geography, while sales from our traditional markets in Europe and South America remain lower primarily due to weak spot market opportunities. This shift in sales by geography is evidenced by sales into Asia growing from 25% of our geographic mix in last year's fourth quarter to 38% in this year's fourth quarter. Most of that shift was sales from sales into Europe, which decreased from 56% in last year's fourth quarter to 36% this year. Our spot volume was 17% in the fourth quarter twenty twenty four, which was primarily sold into the Asian markets.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

This result marked the fourth consecutive quarterly decrease in spot volume sales during 2024, coinciding with the decline in pricing index. For the full year, our spot volume was 27% of total sales volume. Production volume in the fourth quarter was 2,100,000 short tons compared to 2,000,000 short tons in the same quarter twenty twenty three. Mine '4 had an outstanding year and reached a new record high annual production volume of 2,800,000 short tons for the year. In addition, our continuous miner units at our newly developed Blue Creek mine produced 170,000 short tons during the fourth quarter, which is included in the quarterly total.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

The combination of our existing mines continuing to perform well and production of Blue Creek drove a 7% increase in production in the fourth quarter. Our coal inventory increased slightly to 1,100,000 short tons at the end of the fourth quarter from 915,000 short tons at the end of the third quarter, primarily due to the Blue Creek production volume. During the fourth quarter, we spent $142,000,000 on CapEx and mine development. Of that amount, CapEx spending totaled $131,000,000 Mine development costs for the Blue Creek project were $11,000,000 during the quarter. Now that we've started developing the first lonewall panel at Blue Creek, we expect our mine development costs to continue to grow throughout 2025 and until the lonewall production starts, which is expected to occur no later than the second quarter of twenty twenty six.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Looking further at the transformational Blue Creek growth project, we continue to make excellent progress while remaining on budget. Our excitement for the project is increasing as we move closer to starting the longwall production. As we had previously disclosed, production began in the third quarter on time as expected. By the end of the fourth quarter, we commenced two additional continuous minor units for a total of three at Blue Creek and produced 209,000 short tons for the year. In the fourth quarter, we continued to make strong progress by building out the surface infrastructure of Blue Creek.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

We completed the installation of the clean coal silos at the rail loadout, began construction on the dry slurry processing system, made considerable progress on the preparation plant, the Overland Clean coal belt and the barge loadout. We invested over $104,000,000 in the fourth quarter in the continued development of Blue Creek, which brings the full year 2024 project investment to $350,000,000 As of year end, the total project investment to date was $717,000,000 which has been 100% funded from internally generated cash flows from the existing operations. The project team continues to do an excellent job of managing the capital spending and staying on schedule. All remaining key development progress milestones remain on track. We've started to take delivery of the lone wall shields and we expect to have all shields on-site in the first half of twenty twenty five.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

In addition, all major preparation plant equipment is on-site awaiting installation. The preparation plant is expected to be completed in the middle of twenty twenty five. After the preparation plant starts up, we expect to begin selling Blue Creek steelmaking coal in the second half of twenty twenty five. We were incredibly pleased to start two additional minor units of Blue Creek by the end of the fourth quarter as scheduled. These additional units will ramp up to full production in 2025 and we expect to produce approximately 1,000,000 short tons of high vol A steelmaking coal from all three continuous miner units.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

As we continue to ramp up continuous miner production, prepare for the start of the longwall and complete the surface infrastructure over the next year and a half, we expect to hire an additional two fifty to 300 people by the time the Longwall starts no later than the second quarter twenty twenty six. Despite the current weak market conditions, we believe we have sufficient liquidity on hand to complete the project. We remain focused on tight capital spending discipline until the very end of the project. The total of $717,000,000 invested in the development of Blue Creek to this point is more than two thirds of the expected total project capital expenditure. And this spending has been 100% funded from internally generated cash flows.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Absent any unexpected or unusual event, we continue to believe that we will deliver the project on schedule as planned and be completed within our total project capital expenditure estimate of $995,000,000 to approximately $1,100,000,000 Blue Creek represents one of the last remaining untapped premium high quality high vol A coal reserves in The U. S. And we anticipate our coal will generate strong margins. We expect incremental annualized production of at least 4,800,000 short tons after the start up of the Longwall, which will enhance and strengthen our already strong global cost curve positioning and deliver incremental profit and cash flows. Since we launched the project back in 2022, there have been significant improvements to the project scope, inflationary cost increases and changes in the outlook for steelmaking coal prices.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

We expect to provide an update on the original long term project economics in the near future that we expect will demonstrate significant value creation for our stockholders from Blue Creek. I'll now ask Gale to address our fourth quarter results in greater detail.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Thanks, Walt. While we continue to experience weak market fundamentals and some of the lowest steelmaking coal prices since 2021, our underlying operations increased production and sales volumes in the fourth quarter and for the full year of 2024. We capitalized on this volume growth and used the proceeds to invest in our business for the long term and to provide additional cash returns to our stockholders as Walt noted earlier. We delivered another year of strong financial performance where we met or exceeded all of our guidance targets. We made strong progress on the development of our Blue Creek project and remain on schedule and on budget for completion as originally expected.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Excluding our investment in Blue Creek CapEx and mine development, our free cash flow was $28,000,000 in the fourth quarter and $261,000,000 for the year 2024 demonstrating the strength of our business model. For the fourth quarter of twenty twenty four, Warrior recorded net income on a GAAP basis of $1,100,000 or $0.02 per diluted share compared to net income of $129,000,000 or $2.47 per diluted share in the same quarter of 2023. Non GAAP adjusted net income for the fourth quarter excluding the non recurring business interruption expenses and non cash valuation adjustments was $0.15 per diluted share. This compares to adjusted net income of $2.49 per diluted share in the same quarter of 2023. These decreases in quarter over quarter comparisons were primarily driven by 34% lower average net selling prices, partially offset by 23% higher sales volume.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

We reported adjusted EBITDA of $53,000,000 in the fourth quarter of twenty twenty four compared to $164,000,000 in the same quarter of last year. Our adjusted EBITDA margin was 18% in the fourth quarter of twenty twenty four compared to 45% in the same quarter of last year. On a per ton basis, our adjusted EBITDA margin was $28 per short ton in the fourth quarter as compared to $107 last year. As I previously mentioned, these decreases quarter over quarter were primarily driven by 34% lower average net selling prices, partially offset by 23% higher sales volume. In addition, there were other smaller factors in the fourth quarter that made our results lower than the same quarter last year.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

First, our sales volume mix was 8% higher of high vol A from Mine four versus low vol for Mine seven in the fourth quarter of twenty twenty four compared to the same quarter last year. Normally, sales mix has minimal impact on our overall results. However, the wider than normal relativity of High Vol A pricing to the POV pricing into Asia had a timing impact on the fourth quarter results. This higher sales mix of Mine four's high vol lay product which has a lower average net selling price compared to the average net selling price of the premium low vol product at Mine seven lowered our adjusted EBITDA and pre tax income by approximately $9,000,000 Secondly, we incurred a non cash increase in the valuation adjustment of our legacy Black Lung liabilities of $7,000,000 a non cash charge for higher stock compensation expense of $3,000,000 and non cash charges for mark to market losses on our gas hedges of $2,000,000 These last three items lowered our pretax income and were add backs to our adjusted EBITDA. Total revenues were $297,000,000 in the fourth quarter of this year compared to $364,000,000 in the fourth quarter of twenty twenty three.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

This overall decrease of $67,000,000 was primarily due to the decrease in the average net selling prices of $151,000,000 partially offset by the impact of higher sales volume of $84,000,000 The merge and other charges were $3,000,000 lower compared to the fourth quarter of twenty twenty three and resulted in an average net selling price of $155 per short ton in the fourth quarter of twenty twenty four compared to $235 per short ton in the same quarter of last year. Cash cost of sales in the fourth quarter of twenty twenty four was $226,000,000 or 77% of mining revenues compared to $185,000,000 or 51% of mining revenues in the fourth quarter of last year. Of the $41,000,000 net increase in cash cost of sales, $43,000,000 of the increase was driven primarily by the 23% increase in sales volumes. This was partially offset by a $2,000,000 decrease in spending largely due to lower variable transportation royalty cost on steel lower steelmaking coal prices. These lower costs were mostly offset by higher production costs for employee wages and incentives associated with a higher headcount and higher supply and maintenance costs.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Cash cost of sales per short ton FOB port was approximately $119 in the fourth quarter this year compared to $121 in the fourth quarter of twenty twenty three. The decrease was primarily related to the lower variable transportation royalty cost on lower steelmaking coal prices, offsetting the higher production cost for employee wages and incentives associated with a higher headcount, higher mine supplies, higher maintenance costs driven by the higher production volumes. We ended the year at the bottom end of our guidance range and were about $4 per short ton lower than our third quarter cost per ton. Our cash cost of production for the fourth quarter of twenty twenty four was 68% of our total cash cost per short ton compared to 61% in the same quarter last year. Overall transportation royalty cost was 32% of our cash cost of sales per short ton in the fourth quarter of this year on lower average net selling prices compared to 39 percent in the same quarter last year.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

As a result of the lower average net selling price, our cash margin per short ton was $35 in the fourth quarter this year compared to $114 in the same quarter of last year. SG and A expenses were about $18,000,000 or 5.9% of total revenues in the fourth quarter of twenty twenty four and were higher than the fourth quarter of last year of 3.6%. This was primarily due to an increase in employee related stock compensation expenses. Depreciation and depletion expenses were $39,000,000 in the fourth quarter of twenty twenty four and were higher than last year primarily due to the additional assets placed into service at Blue Creek. The interest income earned from our cash investments was lower in the fourth quarter of this year due to lower average cash balances and lower rates of return.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Our interest expense was lower due to the capitalization of interest related to the development of Blue Creek. Our effective income tax rate for the full year 2024 was approximately 12% compared to 13 in 2023. Turning to cash flow, during the fourth quarter of twenty twenty four, free cash flow was a negative $88,000,000 This was the result of cash flows generated by operating activities of $54,000,000 thus cash used for capital expenditures and mine development of $142,000,000 of which $116,000,000 were related to Blue Creek. Our total available liquidity at the end of the fourth quarter of twenty twenty four was $655,000,000 and consisted of cash and cash equivalents of $491,000,000 short and long term investments of $50,000,000 and $114,000,000 available under our ABL facility. Now let's turn to our outlook and guidance for the full year 2025.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

We believe the weak market conditions we have seen over the last few quarters could persist for a prolonged period and could continue to put downward pressure on steel making coal prices. In addition, any new tariffs or trade wars could put additional pressure on seaborne pricing. Despite these expected market conditions, we have a favorable operational performance outlook for 2025 with both higher sales and production volumes anticipated. We expect the demand from our contracted customers to remain stable, while we also expect spot demand to continue to be stronger in the Pacific Basin compared to our traditional markets in the Atlanta. We will continue to pursue our successful strategy of focusing on contracted customers with value added spot activity.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

We are ending 2025 with a strong contracted volume of approximately 85%, spot volume of 15%. The expected increase in production at Blue Creek combined with the expected Blue Creek sales volumes in the second half of the year will have a negative impact on our overall working capital throughout 2025 due to higher inventories and higher accounts receivable. We expect to produce and sell approximately 1,000,000 short tons of High Vol A from the new mine in 2025 which has been included in our guidance targets. Now that we've already invested over $717,000,000 in capital expenditures for Blue Creek, the spending in 2025 and 2026 steps down dramatically and is expected to be very manageable out of the existing cash and available liquidity. I'll now turn it back to Walt for his final comments.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Thanks Dale. Given the macroeconomic factors, we've tempered our expectations of any meaningful improvement in our markets and believe the current conditions may persist for a prolonged duration, barring a meaningful change in the Chinese steel exports or supply of global seaborne steelmaking coals. The challenging steel and raw material market conditions in China are expected to extend into the seaborne market, which we expect to weigh on steelmaking coal prices. On the supply side, we expect Australian production to remain strong, absent some major disruption event. Without a change in market fundamentals, we would expect supply adjustments to be the logical response.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

But history tells us that these decisions are far from being easy and are often delayed as long as possible, extending the market dynamics for longer periods of time. In addition, any new tariffs or other trade measures that may be implemented by The United States or retaliatory tariffs and trade measures by other countries, such as those recently announced by China, may or may not negatively impact our financial results. This impact could result from reduced economic growth, changes in purchasing behaviors by our customers, material changes in the pricing of steelmaking calls or other factors. We believe demand for our products will continue to be strong in these weak market conditions due to brand recognition by our customers for our high quality products. We're prepared to meet these market challenges for an extended period.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

We've built our company to thrive in most market price environments with strong customer contractual relationships, high quality products that realize premium prices, a low and variable cost structure and a strong balance sheet. In addition, we have the remaining capital needed to fund the completion of the Blue Creek project with cash on our balance sheet and we do not expect to slow down or suspend that project if these market conditions continue to persist for a prolonged period of time. We have a nimble operational structure with healthy inventories that can respond quickly to improving market conditions should they return in the near term. Now let me wrap up our prepared remarks with a few comments on our Blue Creek growth project. We expect 2025 to be an extraordinarily successful year as we near completion of key milestones on schedule and on budget, which I've previously mentioned.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

So we anticipate will enable the mine to further ramp up production volume after the longwall starts in 2026. Between now and the start of the longwall at Blue Creek, we expect to hire two fifty to 300 people. With the addition of those people, we expect to drive continuous miner production to approximately 1,000,000 short tons and expect to sell approximately that same amount in the second half of this year. With more than two thirds of the capital already spent on the project, we believe the risk of exceeding our targeted range is low. This should free up cash flows for other purposes during 2025 and beyond.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

We continue to expect that Blue Creek will be a significant and exciting driver of our next stage of growth when global steel prices rebound. With that, we'd like to open the call for questions. Operator?

Operator

And your first question comes from the line of Nick Giles with B. Riley. Please go ahead.

Nick Giles
Senior Research Analyst at B.Riley Securities

Thank you, operator, and good afternoon, everyone. Walt, Dale, I want to congratulate you on the continued strong production, particularly at Mine 4. Sales guidance appears robust. And so I was wondering if you could break out the contribution from Blue Creek versus Mine 4 and Mine 7. And then as we think about the prep plant coming online in the second half, how should we think about cadence of those sales and your level of confidence in achieving realizations in line with your typical guidance? Thanks a lot.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Thank you. Well, what we're projecting for production this year at Blue Creek, this is Walt, is about 1,000,000 tons. And with that prep plant not coming on until the second quarter, We'll then begin moving that coal to market. At that point, I would expect we'll start selling coal in the third quarter, maybe late second quarter, but probably more like the third quarter after that preparation plant comes online and be selling throughout the remainder of the year. When we look at how it will what in comparison to Mine 4, Mine 4 will sell probably over 2,000,000 tons and will probably have 1,000,000 or so out of Blue Creek this year.

Nick Giles
Senior Research Analyst at B.Riley Securities

Well, that's very helpful. My second question was just about your meaningful reductions in cash cost guidance eight dollars per tonne at the midpoint. And was curious how much you would attribute to greater fixed cost absorption versus your pricing and sales sensitive cost expectations and any cost reductions as well?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Hey, Nick, this is Dale. Yes, most of that, the lower end of our guidance is going to be because of the lower met coal prices. So, it's going to have its effect on transportation and royalties the most. So, that would be driving down that cost guidance. As our outlook for this year, We don't really expect these market conditions to change very much.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

As far as catalyst, it's kind of hard to identify what that might be. So, we're preparing ourselves that this would last throughout this year. So, we've baked in a low met coal price assumption into those cost assumptions in that guidance.

Nick Giles
Senior Research Analyst at B.Riley Securities

Dale, I appreciate that. And one more if I could. You've spoken in the past about carefully monitoring freight differentials. And so how should we think about your sales by how your sales by geography could shift, particularly any tons that may have otherwise gone to China?

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Well, I think those tons that would have gone into China are still would still most likely flow into the Asian markets. So they would still be going CFR. So I don't think there would be a big differential in terms of cost of transportation for those tons.

Nick Giles
Senior Research Analyst at B.Riley Securities

Understood. I appreciate all the color and continue best of luck.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Thank you.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Thanks, Nick.

Operator

And the next question will come from Katja Jansic with BMO Capital Markets. Please go ahead.

Katja Jancic
Katja Jancic
Analyst at BMO Capital Markets

Hi. Thank you for taking my questions. Maybe just quickly back on the sales shipments. So given the currently weak environment and the fact that the Blue Creek volume is going to start shipping more in second half, is it fair to say that shipments might be more second half tilted?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Yes, that's right. So, if you look at our guidance and we've said that 1,000,000 tons for Blue Creek, well, the majority of that's going to come in the second half.

Katja Jancic
Katja Jancic
Analyst at BMO Capital Markets

And then maybe, Dale, can you talk a bit about price realizations, especially with high vol A price basically coming from Blue Creek? Is the 85% to 90% still stands?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Yes, it does for now with that smaller volume as we get to the higher volumes in a couple of years that may change. But right now based on history, the relativity of the level HCC to the PLV, if you look back at the ten year historical average through the end of twenty twenty four, that's 95%. However, in the year 2024, that relativity was 79%. So you've this year, you've had a widening of that relativity on that index, but over time, it's much stronger. So we could see more in the lower end of that range, I think, this year as we move forward.

Katja Jancic
Katja Jancic
Analyst at BMO Capital Markets

Just one last one, if I may. Of the 38% of those that were shipped into Asia, can you let us know how much of that was China?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

We don't give information by country for obvious sensitive competitive purposes. Just to say that it's not enough to really make difference. I mean, if we need to reorient that volume, we could. We're not over committed to China.

Katja Jancic
Katja Jancic
Analyst at BMO Capital Markets

Okay. Thank you.

Operator

And the next question will come from Nathan Martin with The Benchmark Company. Please go ahead.

Nathan Martin
Senior Research Analyst at The Benchmark Company LLC

Thanks, operator. Good afternoon, Walt, Dale. Maybe just coming back real quick to the cash cost of sales guidance, the $117 to $127 a tonne. Dale, you mentioned that you're kind of assuming a low met price in that range. Could you kind of provide us what your price assumptions are there?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Yes. We're assuming PLD at $200 for the year. So better than what we are today. But we're not going to overcommit to a higher significantly higher price throughout the end of the year.

Nathan Martin
Senior Research Analyst at The Benchmark Company LLC

Okay, perfect. That's helpful. Also wanted to ask on the inventory front, obviously growing here probably the next two quarters before the prep plant starts up at Blue Creek. Is there any kind of level you guys are targeting for year end 2025 at this point?

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

We would like to get inventory levels back to a normalized range. And I would say that that's probably a couple of hundred thousand. They'll come down, but down to a couple of hundred thousand tons per mine. You have to remember, until later in the year, we won't be able to move high percentages of the Blue Creek as we continue to finish up different pieces of the project. But we definitely expect it to come down considerably in the third and fourth quarter.

Nathan Martin
Senior Research Analyst at The Benchmark Company LLC

Okay. Well, thanks for that. And then speaking of moving those tons, how are things coming along with the Overland Belt structure there for Blue Creek?

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Everything is going very well on time, on budget. We're very pleased with the progress we're making across the project.

Nathan Martin
Senior Research Analyst at The Benchmark Company LLC

And everything going well through Rail Partners well?

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

Yes. Yes. I've been to see a few of the places where they've been investing money to make sure that we're ready to go. And even when the belt is not ready yet and we're trucking some coal from the preparation plant over the rail load out, we'll begin moving coal then. So they'll have several months where they'll get to figure out if there's any weaknesses in their system that need to be firmed up.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

So I think we have a really good plan to have us set up. By the time that longwall starts, we should be in great shape with the port, the rail and the coal mine.

Nathan Martin
Senior Research Analyst at The Benchmark Company LLC

Okay. Great to hear. And then maybe just one more. I noticed in the release today under the capital allocation section, some additional commentary specifically optimizing your capital structure while allowing flexibility to pursue very selective strategic growth opportunities. I think you guys have had that language in your Q, but was just wondering what was behind the decision to kind of bring that front and center to the press release?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Actually, that's been in our press release for like two, three, four years. So it's just to caveat, look, we're not committed to a specific method there or quarter or timing. So that's pretty much been there for a long time, just all in conferencing.

Nathan Martin
Senior Research Analyst at The Benchmark Company LLC

Okay. Great, Dale. Appreciate it, guys. Best of luck in 2025.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Thank you.

Operator

And the next question comes from again, Nick Giles with B. Riley. Please go ahead. Nick, your line may be muted.

Nick Giles
Senior Research Analyst at B.Riley Securities

Sorry about that. Thank you so much for taking my follow-up. In your key factors that may affect your outlook, you do note a new labor contract. And I was wondering if you could remind us of any timing and magnitude of any renewals? Or could this be related to Blue Creek?

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

No, that's related to the fact we still have not reached a new contract with United Mine Workers, continue to negotiate and not sure what the result of that what that would look like if we did complete it.

Nick Giles
Senior Research Analyst at B.Riley Securities

Fair enough. Thanks for the color. And then I just wanted to ask one more. Maybe as we look down the road when Blue Creek begins to reach steady state operations, how should we think about a minimum cash balance in the context of potential increases in shareholder returns?

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

Nick? Yes. We are working on that as we get closer to having Blue Creek online, right? We're going to be significantly larger in our volumes, larger company. So we need to think about what that looks like going forward.

Dale Boyles
Dale Boyles
CFO at Warrior Met Coal

We haven't come to a conclusion yet, but it's going to be significantly more than we've had in the past, just because risks are changing. And as we've always said, being low levered was very important to being successful in this industry. So carrying a little more cash is probably the way to go in the future. But we'll have an update on that as we get real close to Blue Creek coming online.

Operator

At this time, there are no further questions. I'll now turn the call over to Mr. Scheller for any comments. Please go ahead.

Walter Scheller
Walter Scheller
CEO at Warrior Met Coal

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

Operator

Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.

Executives
    • D'Andre Wright
      D'Andre Wright
      Vice President External Affairs
    • Walter Scheller
      Walter Scheller
      CEO
    • Dale Boyles
      Dale Boyles
      CFO
Analysts
    • Nick Giles
      Senior Research Analyst at B.Riley Securities
    • Katja Jancic
      Analyst at BMO Capital Markets
    • Nathan Martin
      Senior Research Analyst at The Benchmark Company LLC
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Key Takeaways

  • Warrior delivered a strong operational quarter with 23% higher sales volumes and 7% higher production volumes year-over-year, achieved record annual output at Mine 4 and commenced first production from the Blue Creek project, generating over $367 million of cash from operations in 2024 and returning $43 million to shareholders in dividends.
  • Steelmaking coal prices hit their lowest levels since 2021 due to excess Chinese steel exports, weak demand and ample supply, with the PLV FOB Australia index averaging $184/short ton in Q4 and gross price realization at 86% for the quarter.
  • The Blue Creek growth project remains on budget and schedule with $717 million invested to date, three continuous miner units operating, key preparation-plant infrastructure targeted for mid-2025 and longwall production expected by Q2 2026, ultimately adding roughly 4.8 million tons of annual high-vol A capacity.
  • Q4 GAAP net income fell to $1.1 million ($0.02/share) from $129 million last year, and adjusted EBITDA declined to $53 million from $164 million, as 34% lower net selling prices were partly offset by volume growth; cash cost of sales was $119/ton with a cash margin of $35/ton.
  • For 2025, Warrior expects higher total sales and production, including approximately 1 million tons from Blue Creek, an ~85% contracted sales mix, cost guidance of $117–$127/ton based on a $200 PLV assumption, and sufficient liquidity to complete Blue Creek while maintaining tight capital discipline.
AI Generated. May Contain Errors.
Earnings Conference Call
Warrior Met Coal Q4 2024
00:00 / 00:00

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