Warrior Met Coal NYSE: HCC posted a strong start to fiscal 2026 as the company completed construction at its Blue Creek mine, drove record quarterly volumes, and delivered sharply higher profitability versus the prior year. Management said the quarter also reflected a notable divergence in steelmaking coal pricing, with premium-quality benchmarks outperforming while High-Vol A pricing lagged expectations.
Blue Creek buildout completed, volumes set quarterly records
Chief Executive Officer Walt Scheller said the first quarter marked a “defining milestone” with Warrior completing “the final construction and project spending” for the Blue Creek mine “ahead of schedule and fully in line with our capital expenditure guidance.” Scheller said total project capital expenditures were “a little over $1 billion,” adding that the project was “on budget and fully paid out of cash from operations without incurring any funded debt.”
With Blue Creek contributing, Warrior reported record quarterly sales and production. Scheller said sales volumes totaled 3.0 million short tons in the quarter, up from 2.2 million short tons in the year-ago quarter, while production reached 3.5 million short tons, up from 2.3 million short tons a year earlier.
Warrior’s inventory rose alongside higher production. Scheller said coal inventories increased to 1.9 million short tons at the end of March, up from 1.6 million short tons at the end of December 2025, and that the company plans to manage the excess inventory “over the remainder of the year to maximize sales volume, profitability, and free cash flow.”
Coal market: premium strength, High-Vol A weaker; freight and Middle East conflict in focus
Scheller said steelmaking coal market conditions stayed “notably strong in the premium quality segment” and “well above” the company’s original expectations, while the High-Vol A segment “underperformed expectations.” He attributed premium strength in part to “tightness in the segment resulting from supply constraints” caused by “weather disruptions and mine production-related challenges in Australia,” which lifted premium pricing early in the quarter and increased demand for Warrior’s Mine 7 premium-quality product.
As Australia’s supply chains began recovering, Scheller said a new Middle East conflict introduced “additional cost pressures, specifically in freight markets,” while also increasing uncertainty around global energy availability. He added that steelmaking coal prices have remained firm as higher oil and diesel prices have “asserted a firmer floor despite soft seaborne demand, especially in the spot market.”
In demand commentary, Scheller pointed to India as a key market supported by “firm domestic steel prices, improving margins, and growing steel production,” noting global pig iron production decreased 2.1% in the first two months of 2026 year-over-year, while India rose 3.1% and China declined 2.7%.
Scheller outlined benchmark movements and the pricing spread between premium and second-tier products:
- PLV FOB Australia rose quickly, reaching $229 per short ton in early February and averaging $213 per short ton for the quarter, up 17% versus Q4 2025.
- Australian LVHCC averaged $173 per short ton, up 12% versus Q4 2025.
- U.S. East Coast HVA averaged $144 per short ton, up 6% versus Q4 2025.
Scheller said Warrior’s gross price realization was 72% in Q1 versus 75% in Q4 2025, driven by “widened” index spreads, a higher High-Vol A sales mix, and more Pacific Basin business on a CFR basis with elevated freight rates.
Sales mix tilts to High-Vol A and Pacific Basin; freight rates elevated
Warrior’s sales mix was 61% High-Vol A in the quarter, which Scheller said was a 10% increase from Q4 2025. He added that as Blue Creek ramps, the mix is expected to become “more weighted toward High-Vol A products in the Pacific Basin destinations over time.”
By geography, Warrior’s sales were 61% into Asia, 25% into Europe, and 14% into South America. Pacific Basin volumes were 61% of total sales volume in Q1, which management said was 4% higher than Q4 2025 and 18% higher than Q1 2025. Spot volumes were 6%.
On freight, CFO Dale Boyles said all Pacific Basin shipments were on a CFR basis. Responding to a question on current freight costs, Boyles said rates were “much higher,” adding he saw some rates “in around mid $50” recently and that Q2 was “only averaging somewhere in the upper $40s,” calling the move “pretty significant.”
Financial results: net income swings positive; adjusted EBITDA surges
Boyles reported adjusted EBITDA of $143 million in Q1 2026, up 54% from Q4 2025. He said the increase reflected higher sales volumes and a 15% increase in average net selling price, partially offset by higher cash costs per ton and weaker operating cash flow tied to working capital.
Compared with the year-ago quarter, Warrior recorded net income of $72 million, or $1.37 per diluted share, versus a net loss of $8 million, or $0.16 per diluted share, in Q1 2025. Adjusted EBITDA rose to $143 million from $39 million, and the adjusted EBITDA margin improved to 31% from 13%.
Total revenues were $459 million in Q1 2026 versus $300 million in Q1 2025. Boyles said the increase primarily reflected higher sales volumes and higher average gross selling prices, partially offset by the impact of a higher mix of High-Vol A tons sold. Average net selling price increased to $149 per short ton from $136 a year earlier.
Costs improved on a per-ton basis. Boyles said cash cost of sales per short ton FOB port was about $96 in Q1 2026 compared with $112 a year ago. He also highlighted the benefit of a new “45X production tax credit,” noting $8 million of benefit in the quarter. In the Q&A, Boyles quantified the credit at “about $8.4 million or $3 a ton for the quarter.”
SG&A expenses were $28 million, up $10 million year-over-year, which Boyles attributed primarily to higher employee-related expenses, including stock compensation. Depreciation and depletion were $52 million, up 15% year-over-year due to additional Blue Creek assets placed in service and higher sales volume. Warrior recorded income tax expense of about $6 million on pre-tax income of $79 million, with an effective tax rate of 11% due to depletion-related benefits and a foreign-derived intangible income deduction.
Cash flow, liquidity, and outlook: working capital headwinds expected to reverse; guidance reaffirmed
Operating cash flow was negative $12 million in Q1 2026, which Boyles said was driven by a $146 million working capital increase—primarily $115 million of higher accounts receivable—stemming from higher volumes, higher prices, and the timing of shipments. Boyles said 43% of sales volume was weighted to March, pushing collections into Q2.
Free cash flow was negative $92 million, reflecting the operating cash use and $80 million of capital expenditures, including the final $66 million invested to complete the Blue Creek development project. Boyles said the negative free cash flow was “expected and previously communicated,” adding it was “slightly more negative than anticipated” due to timing and is expected to turn positive in Q2.
On liquidity, Boyles said Warrior ended the quarter with total available liquidity of $364 million, comprised of $203 million in cash and cash equivalents, $20 million in short-term investments, and $141 million available under its ABL facility.
Management reaffirmed its full-year 2026 outlook and guidance “as previously communicated in February.” Boyles cautioned the company is beginning to see inflationary pressures in materials and supplies—such as steel roof supports and shear bits—as well as diesel fuel, along with tariffs and higher shipping costs on raw materials. While not materially impacted yet, Boyles said costs “could see an increase of a few dollars per ton” later in the year, though the full-year impact is “extremely difficult to predict.”
Scheller said Q1 results were “better than expected” due to stronger premium pricing for longer and volumes slightly ahead of internal plans. He added that Warrior expects steelmaking coal prices to remain above 2025 average levels “absent material changes in supply and demand,” while noting the impact and duration of the Middle East conflict are not currently quantifiable for the full year.
On shareholder returns after the completion of Blue Creek, Boyles said the company expects to consider returning more capital “once we start to generate some cash,” and described a philosophy of “a rising fixed quarterly dividend supplemented by special dividends and some selected stock buybacks,” while noting the timing depends on cash generation.
On inventories, management said it expects a gradual decline over the next few quarters rather than a sharp drawdown in any single quarter, and that the company is not currently constrained by storage limits, particularly at Blue Creek where “multiple places” exist to store significant inventory.
About Warrior Met Coal NYSE: HCC
Warrior Met Coal NYSE: HCC is a leading producer of premium metallurgical coal, operating deep underground mining complexes in Central Alabama's Blue Creek and Brookwood mining districts. The company focuses exclusively on the extraction and sale of high-grade hard coking coal, a critical raw material used in steel production. Its mining operations harness longwall mining technology and rigorous safety protocols to deliver consistent coal quality to customers worldwide.
Warrior Met Coal's product portfolio centers on premium hard coking coal, semisoft coking coal, and pulverized coal injection (PCI) products.
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