NACCO Industries Q2 Earnings Call Highlights

Key Points

• Strong core operating performance lifted Q2 revenue 6% to $72.3 million and Adjusted EBITDA 72% to $15.9 million, with major gains in utility coal mining, contract mining and minerals and royalties.
• $12 million in solar-project impairment charges pushed NACCO to a $2.3 million operating loss and a $1 million net loss; management expects full-year operating profit and net income to decline from 2025 and is evaluating asset sales and other measures to limit further costs.
• Contract mining is positioned for substantial growth as the Palm Beach County project expands to four draglines, while NACCO plans to prioritize cash flow toward debt reduction and liquidity, with up to $35 million of investment planned for the rest of 2026.

NACCO Industries NYSE: NC reported stronger operating performance across its utility coal mining, contract mining and minerals and royalties businesses in the second quarter of 2026, but solar-project impairment charges drove the company to a consolidated operating loss and net loss for the period.

Revenue rose 6% year over year to $72.3 million, while gross profit more than doubled to $15.2 million from $6.8 million. Consolidated Adjusted EBITDA increased 72% to $15.9 million, compared with $9.3 million a year earlier. However, NACCO recorded $12 million in impairment charges tied to two solar development projects within its ReGen Resources business.

The company posted an operating loss of $2.3 million, compared with an operating loss of less than $100,000 in the prior-year quarter. NACCO reported a net loss of $1 million, or $0.13 per diluted share, versus net income of $3.3 million, or $0.44 per diluted share, in the second quarter of 2025.

Solar impairments offset core-business gains

President and CEO J.C. Butler said the solar impairments followed a reassessment of project economics after the company received updated information on rising costs and delays in connecting generation facilities to the power grid.

Butler cited tax-law changes associated with the One Big Beautiful Bill Act, demand for generating equipment and engineering, procurement and construction services, higher costs for grid-connection equipment, and tariff-related price increases. He said the developments created “a perfect storm” for renewable projects that had been initiated before the law’s enactment.

“We are not treating this as business as usual,” Butler said, adding that the company is evaluating alternatives to monetize the investments and limit additional capital needs. Those alternatives include potential asset sales, contract amendments and other strategic actions. He said further curtailment charges could occur depending on the outcomes.

NACCO said the experience reinforced its intention to apply heightened scrutiny to investments outside its established operating platforms. The company expects second-half and full-year operating profit and net income to be lower than in 2025, reflecting the solar charges and the potential for additional curtailment or impairment charges.

Utility coal profit rises despite lower production needs

Utility coal mining operating profit rose to $6.3 million from $1.2 million in the prior-year quarter, while segment Adjusted EBITDA increased to $8.7 million from $3.4 million. Results were driven primarily by improved performance at Mississippi Lignite Mining Company, or MLMC.

MLMC faced lower production requirements after operational issues at its customer’s power plant. Butler said the mining operation shifted resources to planned reclamation work during the outage. The move reduced the company’s asset retirement obligation rather than recording those costs as an expense in the quarter.

Management said it remains engaged with the customer regarding delayed payments disclosed in NACCO’s 10-Q. Butler said the company is focused on collecting amounts owed, preserving its contractual rights and evaluating available options under the contract, which has been in place since 1995 and runs through 2032.

For the full year, NACCO expects utility coal mining operating profit to increase from 2025 because of its strong first-half performance. Still, it expects MLMC results in the second half to decline from the first half amid lower customer demand, higher diesel costs and an anticipated inventory impairment charge. Earnings from unconsolidated mining operations are also expected to decline following the planned completion of reclamation services at Sibanye Mining Company on Sept. 30, 2026.

Contract mining expands as Palm Beach work ramps

Contract mining delivered substantial year-over-year gains as NACCO began and ramped up its Palm Beach County Dragline Services contract and served higher customer requirements at its limestone mining operations.

Segment operating profit increased to $3.8 million from $1 million, while Adjusted EBITDA rose to $6.3 million from $3.9 million. Revenue, net of reimbursed costs, increased 34%.

The company expects substantial growth in contract mining operating profit and Adjusted EBITDA for both the second half and full year, although second-half results are expected to moderate from the first half because of lower anticipated customer demand. NACCO is also preparing to begin operations at a new limestone quarry in Arizona later this year.

Butler said the Palm Beach County project is expanding to four draglines, with two already operating, a third being commissioned and a fourth expected to begin later in 2026. He described the project as an opportunity to apply NACCO’s mining capabilities to infrastructure work related to Lake Okeechobee and the Everglades.

Minerals and royalties benefit from oil prices

In minerals and royalties, operating profit increased to $6.7 million from $5.2 million, while Adjusted EBITDA rose to $7.7 million from $6.1 million. Royalty revenue increased 46%, supported by higher oil prices and a favorable adjustment to prior-period pricing estimates. Lower earnings from NACCO’s Eiger investment partly offset those gains.

Management expects the segment’s results to decline in the remainder of 2026 compared with the first half, the second half of 2025 and full-year 2025. Increased Eiger income and higher oil prices are expected to be more than offset by production declines and changes in production and development activity.

As of June 30, NACCO had $120.1 million in outstanding debt and total liquidity of $114.6 million, including $45.5 million of cash and $69.1 million available under its revolving credit facility. The company said it plans to prioritize free cash flow toward liquidity improvement and debt reduction while selectively funding investments that meet its return criteria. NACCO expects to invest up to $35 million during the remainder of 2026, primarily in business-development opportunities.

About NACCO Industries (NYSE:NC)

NACCO Industries, Inc is a Cleveland, Ohio–based diversified holding company with a history spanning more than a century. Through its principal subsidiaries, the company operates in two primary business areas: coal mining and material-handling system design and manufacturing. Originally incorporated in 1913, NACCO has maintained a presence on the New York Stock Exchange under the ticker symbol NC since the 1920s, evolving its portfolio to meet changing market demands while preserving its core expertise in bulk commodities and industrial services.

The North American Coal Corporation, NACCO's coal mining segment, is among the largest producers of lignite coal in the United States.

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