NACCO INDUSTRIES ANNOUNCES SECOND QUARTER 2024 RESULTS
Consolidated Q2 2024 Highlights:
-
Operating profit of
$7.4 million increased from$1.8 million in Q2 2023-
Includes
$4.5 million gain on sale of an asset
-
Includes
-
Income before taxes of
$6.2 million increased from$3.3 million in Q2 2023 -
Net income of
$6.0 million , or$0.81 /share versus$2.5 million , or$0.34 /share, in Q2 2023
|
Three Months Ended |
Six Months Ended |
|||||||||
($ in thousands, except per share amounts) |
|
|
|
|
% Change |
|
|
|
|
|
% Change |
Operating Profit |
|
|
|
|
320.9 % |
|
|
|
|
|
240.2 % |
Income before taxes |
|
|
|
|
91.2 % |
|
|
|
|
|
54.8 % |
Net Income |
|
|
|
|
137.0 % |
|
|
|
|
|
28.4 % |
Diluted Earnings/share |
|
|
|
|
138.2 % |
|
|
|
|
|
30.3 % |
EBITDA* |
|
|
|
|
46.7 % |
|
|
|
|
|
23.9 % |
|
*Non-GAAP financial measures are defined and reconciled on page 8. |
The substantial increase in the Company's 2024 second-quarter operating profit and income before taxes was primarily due to significantly improved operating results in the Coal Mining and North American Mining segments as well as a
At
Detailed Discussion of Results
Coal Mining Results
|
Q2 2024 |
|
Q2 2023 |
Tons of coal delivered |
(in thousands) |
||
Unconsolidated operations |
4,930 |
|
4,602 |
Consolidated operations |
423 |
|
906 |
Total deliveries |
5,353 |
|
5,508 |
|
|||
|
Q2 2024 |
|
Q2 2023 |
|
(in thousands) |
||
Revenues |
$ 14,996 |
|
$ 26,343 |
Earnings of unconsolidated operations |
$ 12,006 |
|
$ 9,962 |
Operating expenses(1) |
$ 8,097 |
|
$ 7,711 |
Operating profit (loss) |
$ 2,767 |
|
$ (4,675) |
Segment Adjusted EBITDA(2) |
$ 5,663 |
|
$ (327) |
|
(1) Operating expenses consist of Selling, general and administrative expenses, Amortization of intangible assets and (Gain) loss on sale of assets. |
(2) Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP. See non-GAAP explanation and the related reconciliations to GAAP on page 9. |
The Coal Mining segment generated significantly increased second-quarter operating profit and Segment Adjusted EBITDA compared with prior year losses despite lower revenues.
Second-quarter 2024 revenues decreased primarily as a result of fewer tons delivered at
The increase in operating results and Segment Adjusted EBITDA were mainly due to improved results at
The improvement in
Coal Mining Outlook
Coal deliveries in the second half of 2024 are expected to increase over 2023 levels as higher deliveries at Coteau and Falkirk are partly offset by fewer deliveries at
Excluding the
The anticipated second-half 2024 increase in earnings at the unconsolidated coal mining operations compared with 2023 is driven primarily by an expectation for increased deliveries, as well as the cessation of temporary price concessions at Falkirk.
Second-half 2024 results are also expected to increase significantly over the first half primarily due to higher earnings at Falkirk and improved results at
Capital expenditures in 2024 are expected to be approximately
North American
|
Q2 2024 |
|
Q2 2023 |
|
(in thousands) |
||
Tons delivered |
16,000 |
|
13,939 |
|
|||
|
Q2 2024 |
|
Q3 2023 |
|
(in thousands) |
||
Revenues |
$ 27,920 |
|
$ 21,716 |
Operating profit |
$ 3,085 |
|
$ 2,214 |
Segment Adjusted EBITDA(1) |
$ 5,519 |
|
$ 4,069 |
|
(1) Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP. See non-GAAP explanation and the related reconciliations to GAAP on page 9. |
North American Mining® revenues grew 29%, operating profit improved 39% and Segment Adjusted EBITDA rose 36% in second-quarter 2024 compared with 2023. These improvements were due to a number of factors:
- an increase in customer requirements,
- favorable pricing and delivery mix,
- improved margins at the limestone quarries resulting from mutually beneficial contract amendments, and
- a new 15-year contract to mine phosphate.
These items were partly offset by an increase in operating expenses.
North American
North American Mining expects operating profit and Segment Adjusted EBITDA to increase in both the 2024 second half and full year over the respective 2023 periods but decrease from the 2024 first half. The year-over-year improvements are primarily due to the late 2023 amendment of limestone contracts to more mutually advantageous contract terms, a scope of work expansion with another customer and the second-quarter 2024 commencement of a new 15-year contract to mine phosphate at a quarry in central
Sawtooth Mining is the exclusive provider of comprehensive mining services at
Capital expenditures in 2024 are expected to be approximately
Minerals Management Results
|
Q2 2024 |
|
Q2 2023 |
|
(in thousands) |
||
Revenues |
$ 5,593 |
|
$ 9,171 |
Operating profit |
$ 7,591 |
|
$ 7,289 |
Segment Adjusted EBITDA(1) |
$ 8,914 |
|
$ 8,038 |
|
(1) Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP. See non-GAAP explanation and the related reconciliations to GAAP on page 9. |
Minerals Management's second-quarter 2024 operating profit and Segment Adjusted EBITDA improved modestly over the prior year quarter. These results include a
Minerals Management Outlook
Operating profit and Segment Adjusted EBITDA for the 2024 second half and full year are expected to increase compared with the respective 2023 periods, excluding the fourth-quarter 2023 impairment charge of
The Minerals Management segment derives income primarily from royalty-based leases under which lessees make payments to the Company based on their sale of natural gas, oil, natural gas liquids and coal, extracted primarily by third parties. As an owner of royalty and mineral interests, the Company's access to information concerning activity and operations with respect to its interests is limited. The Company's expectations are based on the best information currently available. Changing prices of natural gas and oil could have a significant impact on Minerals Management's operating profit. Development of additional wells on existing interests in excess of current expectations, or acquisitions of additional interests, could be accretive to future results.
Minerals Management is targeting investments of up to
Consolidated Outlook
Result for the second half of 2023 included a
Consolidated second-half operating profit is expected to increase compared with both the first half of 2024 and second half of 2023. These improvements are primarily due to anticipated increases in profitability at the Coal Mining segment from improved results at
The Company also expects consolidated net income in the 2024 second half and full year to increase compared with the respective 2023 periods. This improvement is anticipated to be partly offset by an increase in net interest expense as a result of additional borrowings and lower cash levels and higher income tax expense.
The Company is taking steps to terminate its defined benefit pension plan, which will eliminate future volatility from changes in the pension obligation. In connection with this action, obligations under this plan will be transferred to a third-party insurance provider. The Company expects to utilize surplus assets to fund a qualified replacement plan, reducing future cash funding requirements. Although the plan is currently over funded, NACCO is anticipating a non-cash settlement charge in the 2024 fourth quarter, which is expected to partly offset improvements in 2024 second-half operating profit. As a result, the Company anticipates that consolidated net income and Adjusted EBITDA will decrease in the second half of 2024 compared with the first half of the year. While the Company anticipates that third-quarter net income will improve significantly over the second quarter, fourth-quarter net income is expected to be substantially lower than both the third quarter and prior year fourth quarter primarily as a result of the anticipated non-cash pension settlement charge.
Consolidated capital expenditures are expected to total approximately
Long-term Growth and Diversification
Management is transforming NACCO into a broad-based natural resources company and is optimistic about the Company's long-term business outlook. NACCO's businesses provide critical inputs for electricity generation, construction and development, and the production of industrial minerals and chemicals. Increasing demand for electricity, on-shoring and current federal policies are creating favorable macroeconomic trends within these industries. The Company believes its businesses have competitive advantages that provide value to customers and create long-term value for stockholders. The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a robust portfolio of affiliated businesses. Opportunities for growth remain strong. Acquisitions of additional mineral interests and improvements in the outlook for Coal Mining segment customers, as well as new contracts at Mitigation Resources and North American Mining should be accretive to the Company's outlook.
The Minerals Management segment continues to pursue acquisitions of mineral and royalty interests in
North American Mining continues to evaluate new business opportunities and drive profitable growth in line with refined strategic objectives. New contracts and contract extensions are central to the business' organic growth strategy, and the Company expects North American Mining to be a substantial contributor to operating profit over time.
Mitigation Resources, which provides stream and wetland mitigation solutions as well as comprehensive reclamation and restoration construction services, continues to build on the substantial foundation it has established over the past several years. This business offers an opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise and a strong reputation. It currently has ten mitigation banks and four permittee-responsible mitigation projects located in
NACCO also continues to pursue activities which can strengthen the resiliency of its existing coal mining operations. The Company remains focused on managing coal production costs and maximizing efficiencies and operating capacity at mine locations to help customers with management fee contracts be more competitive. These activities benefit both customers and the Company's Coal Mining segment, as fuel cost is a significant driver for power plant dispatch. Increased power plant dispatch results in increased demand for coal by the Coal Mining segment's customers. Fluctuating natural gas prices, weather and availability of renewable energy sources, such as wind and solar, could affect the amount of electricity dispatched from coal-fired power plants. While the Company realizes the coal mining industry faces political and regulatory challenges and demand for coal is projected to decline over the longer-term, the Company believes coal should be an essential part of the energy mix in
The Company continues to look for ways to create additional value by utilizing its core mining competencies which include reclamation and permitting. NACCO established ReGen Resources to utilize these skills to address the rapidly increasing demand for additional power generation sources in
NACCO is committed to maintaining a conservative capital structure as it continues to grow and diversify, while avoiding unnecessary risk. The Company believes strategic diversification will generate cash that can be re-invested to strengthen and expand the businesses. The Company also continues to maintain the highest levels of customer service and operational excellence with an unwavering focus on safety and environmental stewardship.
****
Conference Call
In conjunction with this news release, the management of
Non-GAAP and Other Measures
This release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the
Forward-looking Statements Disclaimer
The statements contained in this news release that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (2) any customer's premature facility closure or extended project development delay, (3) regulatory actions, including the
About
*****
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
|
|||||||
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
||||
|
|
|
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(In thousands, except per share data) |
||||||
Revenues |
$ 52,345 |
|
$ 61,350 |
|
$ 105,634 |
|
$ 111,491 |
Cost of sales |
45,327 |
|
54,943 |
|
91,598 |
|
101,727 |
Gross profit |
7,018 |
|
6,407 |
|
14,036 |
|
9,764 |
Earnings of unconsolidated operations |
13,592 |
|
11,084 |
|
26,899 |
|
24,908 |
Operating expenses |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
17,720 |
|
14,746 |
|
33,173 |
|
29,622 |
Amortization of intangible assets |
116 |
|
927 |
|
242 |
|
1,654 |
(Gain) loss on sale of assets
|
(4,592) |
|
68 |
|
(4,603) |
|
(168) |
|
13,244 |
|
15,741 |
|
28,812 |
|
31,108 |
Operating profit |
7,366 |
|
1,750 |
|
12,123 |
|
3,564 |
Other expense (income) |
|
|
|
|
|
|
|
Interest expense |
1,311 |
|
572 |
|
2,422 |
|
1,117 |
Interest income |
(1,038) |
|
(1,714) |
|
(2,165) |
|
(2,869) |
Closed mine obligations |
471 |
|
433 |
|
926 |
|
842 |
Loss (gain) on equity securities |
264 |
|
(421) |
|
(777) |
|
(1,049) |
Other, net |
130 |
|
(377) |
|
(84) |
|
(2,102) |
|
1,138 |
|
(1,507) |
|
322 |
|
(4,061) |
Income before income tax provision (benefit) |
6,228 |
|
3,257 |
|
11,801 |
|
7,625 |
Income tax provision (benefit) |
256 |
|
737 |
|
1,259 |
|
(587) |
Net income |
$ 5,972 |
|
$ 2,520 |
|
$ 10,542 |
|
$ 8,212 |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic earnings per share |
$ 0.81 |
|
$ 0.34 |
|
$ 1.42 |
|
$ 1.10 |
Diluted earnings per share |
$ 0.81 |
|
$ 0.34 |
|
$ 1.42 |
|
$ 1.09 |
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
7,394 |
|
7,513 |
|
7,419 |
|
7,465 |
Diluted weighted average shares outstanding |
7,394 |
|
7,513 |
|
7,437 |
|
7,515 |
|
|
|
|
|
|
|
|
CONSOLIDATED EBITDA RECONCILIATION (UNAUDITED) |
|||||||
|
|||||||
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
||||
|
|
|
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
(in thousands) |
||||||
Net income |
$ 5,972 |
|
$ 2,520 |
|
$ 10,542 |
|
$ 8,212 |
Income tax provision (benefit) |
256 |
|
737 |
|
1,259 |
|
(587) |
Interest expense |
1,311 |
|
572 |
|
2,422 |
|
1,117 |
Interest income |
(1,038) |
|
(1,714) |
|
(2,165) |
|
(2,869) |
Depreciation, depletion and amortization expense |
7,007 |
|
7,090 |
|
12,699 |
|
14,109 |
EBITDA* |
$ 13,508 |
|
$ 9,205 |
|
$ 24,757 |
|
$ 19,982 |
|
|||||||
*EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures. NACCO defines EBITDA as net income (loss) before income taxes, net interest expense and depreciation, depletion and amortization expense. EBITDA is not a measure under |
FINANCIAL SEGMENT HIGHLIGHTS AND SEGMENT ADJUSTED EBITDA RECONCILIATIONS (UNAUDITED) |
|||||||||||
|
|||||||||||
|
Three Months Ended |
||||||||||
|
Coal Mining |
|
North |
|
Minerals |
|
Unallocated |
|
Eliminations |
|
Total |
|
(In thousands) |
||||||||||
Revenues |
$ 14,996 |
|
$ 27,920 |
|
$ 5,593 |
|
$ 4,566 |
|
$ (730) |
|
$ 52,345 |
Cost of sales |
16,138 |
|
24,254 |
|
1,501 |
|
4,167 |
|
(733) |
|
45,327 |
Gross profit (loss) |
(1,142) |
|
3,666 |
|
4,092 |
|
399 |
|
3 |
|
7,018 |
Earnings of unconsolidated operations |
12,006 |
|
1,448 |
|
138 |
|
— |
|
— |
|
13,592 |
(Gain) loss on sale of assets |
(79) |
|
(1) |
|
(4,512) |
|
— |
|
— |
|
(4,592) |
Operating expenses* |
8,176 |
|
2,030 |
|
1,151 |
|
6,479 |
|
— |
|
17,836 |
Operating profit (loss) |
$ 2,767 |
|
$ 3,085 |
|
$ 7,591 |
|
$ (6,080) |
|
$ 3 |
|
$ 7,366 |
Segment Adjusted EBITDA** |
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
$ 2,767 |
|
$ 3,085 |
|
$ 7,591 |
|
$ (6,080) |
|
$ 3 |
|
$ 7,366 |
Depreciation, depletion and amortization |
2,896 |
|
2,434 |
|
1,323 |
|
354 |
|
— |
|
7,007 |
Segment Adjusted EBITDA** |
$ 5,663 |
|
$ 5,519 |
|
$ 8,914 |
|
$ (5,726) |
|
$ 3 |
|
$ 14,373 |
|
|||||||||||
|
Three Months Ended |
||||||||||
|
Coal Mining |
|
North |
|
Minerals |
|
Unallocated |
|
Eliminations |
|
Total |
|
(In thousands) |
||||||||||
Revenues |
$ 26,343 |
|
$ 21,716 |
|
$ 9,171 |
|
$ 4,628 |
|
$ (508) |
|
$ 61,350 |
Cost of sales |
33,269 |
|
18,884 |
|
910 |
|
2,375 |
|
(495) |
|
54,943 |
Gross profit (loss) |
(6,926) |
|
2,832 |
|
8,261 |
|
2,253 |
|
(13) |
|
6,407 |
Earnings of unconsolidated operations |
9,962 |
|
1,122 |
|
— |
|
— |
|
— |
|
11,084 |
(Gain) loss on sale of assets |
68 |
|
— |
|
— |
|
— |
|
— |
|
68 |
Operating expenses* |
7,643 |
|
1,740 |
|
972 |
|
5,318 |
|
— |
|
15,673 |
Operating profit (loss) |
$ (4,675) |
|
$ 2,214 |
|
$ 7,289 |
|
$ (3,065) |
|
$ (13) |
|
$ 1,750 |
Segment Adjusted EBITDA** |
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
$ (4,675) |
|
$ 2,214 |
|
$ 7,289 |
|
$ (3,065) |
|
$ (13) |
|
$ 1,750 |
Depreciation, depletion and amortization |
4,348 |
|
1,855 |
|
749 |
|
138 |
|
— |
|
7,090 |
Segment Adjusted EBITDA** |
$ (327) |
|
$ 4,069 |
|
$ 8,038 |
|
$ (2,927) |
|
$ (13) |
|
$ 8,840 |
|
*Operating expenses consist of Selling, general and administrative expenses and Amortization of intangible assets. |
**Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures. NACCO defines Segment Adjusted EBITDA as operating profit (loss) plus depreciation, depletion and amortization expense. Segment Adjusted EBITDA is not a measure under |
FINANCIAL SEGMENT HIGHLIGHTS AND SEGMENT ADJUSTED EBITDA RECONCILIATIONS (UNAUDITED) |
|||||||||||
|
|||||||||||
|
Six Months Ended |
||||||||||
|
Coal Mining |
|
North |
|
Minerals |
|
Unallocated |
|
Eliminations |
|
Total |
|
(In thousands) |
||||||||||
Revenues |
$ 30,541 |
|
$ 52,403 |
|
$ 15,994 |
|
$ 7,828 |
|
$ (1,132) |
|
$ 105,634 |
Cost of sales |
37,081 |
|
45,925 |
|
2,865 |
|
6,879 |
|
(1,152) |
|
91,598 |
Gross profit (loss) |
(6,540) |
|
6,478 |
|
13,129 |
|
949 |
|
20 |
|
14,036 |
Earnings of unconsolidated operations |
24,013 |
|
2,813 |
|
73 |
|
— |
|
— |
|
26,899 |
(Gain) loss on sale of assets |
(89) |
|
(2) |
|
(4,512) |
|
— |
|
— |
|
(4,603) |
Operating expenses* |
15,212 |
|
3,853 |
|
2,193 |
|
12,157 |
|
— |
|
33,415 |
Operating profit (loss) |
$ 2,350 |
|
$ 5,440 |
|
$ 15,521 |
|
$ (11,208) |
|
$ 20 |
|
$ 12,123 |
Segment Adjusted EBITDA** |
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
$ 2,350 |
|
$ 5,440 |
|
$ 15,521 |
|
$ (11,208) |
|
$ 20 |
|
$ 12,123 |
Depreciation, depletion and amortization |
5,110 |
|
4,690 |
|
2,316 |
|
583 |
|
— |
|
12,699 |
Segment Adjusted EBITDA** |
$ 7,460 |
|
$ 10,130 |
|
$ 17,837 |
|
$ (10,625) |
|
$ 20 |
|
$ 24,822 |
|
|||||||||||
|
Six Months Ended |
||||||||||
|
Coal Mining |
|
North |
|
Minerals |
|
Unallocated |
|
Eliminations |
|
Total |
|
(In thousands) |
||||||||||
Revenues |
$ 46,996 |
|
$ 42,349 |
|
$ 17,456 |
|
$ 5,819 |
|
$ (1,129) |
|
$ 111,491 |
Cost of sales |
59,147 |
|
38,125 |
|
1,962 |
|
3,589 |
|
(1,096) |
|
101,727 |
Gross profit (loss) |
(12,151) |
|
4,224 |
|
15,494 |
|
2,230 |
|
(33) |
|
9,764 |
Earnings of unconsolidated operations |
22,428 |
|
2,480 |
|
— |
|
— |
|
— |
|
24,908 |
(Gain) loss on sale of assets |
(168) |
|
— |
|
— |
|
— |
|
— |
|
(168) |
Operating expenses* |
14,807 |
|
3,660 |
|
2,161 |
|
10,648 |
|
— |
|
31,276 |
Operating profit (loss) |
$ (4,362) |
|
$ 3,044 |
|
$ 13,333 |
|
$ (8,418) |
|
$ (33) |
|
$ 3,564 |
Segment Adjusted EBITDA** |
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
$ (4,362) |
|
$ 3,044 |
|
$ 13,333 |
|
$ (8,418) |
|
$ (33) |
|
$ 3,564 |
Depreciation, depletion and amortization |
8,588 |
|
3,741 |
|
1,560 |
|
220 |
|
— |
|
14,109 |
Segment Adjusted EBITDA** |
$ 4,226 |
|
$ 6,785 |
|
$ 14,893 |
|
$ (8,198) |
|
$ (33) |
|
$ 17,673 |
|
*Operating expenses consist of Selling, general and administrative expenses and Amortization of intangible assets. |
**Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures. NACCO defines Segment Adjusted EBITDA as operating profit (loss) plus depreciation, depletion and amortization expense. Segment Adjusted EBITDA is not a measure under |
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