NACCO INDUSTRIES ANNOUNCES THIRD QUARTER 2024 RESULTS
Consolidated Q3 2024 Highlights:
Operating profit of $19.7 million compared with Q3 2023 $6.3 million operating loss
Q3 2024 includes $13.6 million of business interruption insurance income
Net income of $15.6 million versus Q3 2023 net loss of $3.8 million
CLEVELAND, Oct. 30, 2024 /PRNewswire/ -- NACCO Industries® (NYSE:NC) today announced the following consolidated results for the three months ended September 30, 2024. Comparisons in this news release are to the three months ended September 30, 2023, unless otherwise noted.
Three Months Ended
Nine Months Ended
($ in thousands, except per share amounts)
9/30/2024
9/30/2023
$ Change
9/30/2024
9/30/2023
$ Change
Operating Profit (Loss)
$19,699
$(6,267)
$25,966
$31,822
$(2,703)
$34,525
Income (loss) before taxes
$19,132
$(5,850)
$24,982
$30,933
$1,775
$29,158
Net Income (Loss)
$15,635
$(3,832)
$19,467
$26,177
$4,380
$21,797
Diluted Earnings (Loss)/share
$2.14
$(0.51)
$2.65
$3.54
$0.58
$2.96
EBITDA*
$25,685
$423
$25,262
$50,442
$20,405
$30,037
*
Non-GAAP financial measures are defined and reconciled on page 8.
The substantial increase in the Company's 2024 third-quarter operating profit and net income was primarily due to $13.6 million of pre-tax income related to business interruption insurance recoveries at Mississippi Lignite Mining Company and significantly improved operating results in the Coal Mining and Minerals Management segments. These improvements were partly offset by lower North American Mining results.
At September 30, 2024, the Company had consolidated cash of $63.1 million and total debt of $70.2 million. During the three months ended September 30, 2024, the Company repurchased approximately 68,000 shares for $2.0 million under an existing share repurchase program. The Company also amended its revolving credit facility during the quarter to increase the revolving credit commitments to $200.0 million and extend the maturity to September 2028. Availability under the revolver was $130.9 million at September 30, 2024.
Detailed Discussion of Results
Coal Mining Results
Q3 2024
Q3 2023
Tons of coal delivered
(in thousands)
Unconsolidated operations
5,335
5,105
Consolidated operations
474
628
Total deliveries
5,809
5,733
Q3 2024
Q3 2023
(in thousands)
Revenues
$
17,706
$
18,665
Earnings of unconsolidated operations
$
13,821
$
11,259
Business interruption insurance recoveries
$
13,612
$
—
Operating expenses(1)
$
7,147
$
7,802
Operating profit (loss)
$
19,938
$
(4,697)
Segment Adjusted EBITDA(2)
$
22,092
$
(361)
(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 significant third-quarter 2024 operating profit and Segment Adjusted EBITDA compared with prior year losses, despite moderately lower revenues.
Third-quarter 2024 revenues decreased primarily as a result of fewer tons delivered at Mississippi Lignite Mining Company. Customer demand declined as the power plant served by the mine operated with only one of its two boilers from December 2023 to the end of July 2024. This mechanical issue at the power plant has now been resolved. During the third quarter, Mississippi Lignite Mining Company settled its business interruption insurance claim associated with the boiler outage for $13.6 million.
Excluding the effect of the insurance recoveries, operating profit and Segment Adjusted EBITDA still grew substantially. This increase was mainly due to improved results at Mississippi Lignite Mining Company and higher earnings of unconsolidated operations.
The improvement in Mississippi Lignite Mining Company results was primarily attributable to increased operating efficiencies due to the completion of the move to a new mine area in late 2023 and improved mining conditions. Changes in the level of coal inventory and costs capitalized into inventory also contributed to the improvement. The increase in earnings of unconsolidated operations was primarily due to increased pricing at Falkirk that began in June 2024 when temporary price concessions ended, and improved results at Coteau.
Coal Mining Outlook
The prior-year fourth-quarter results included a $60.8 million pre-tax impairment charge. Comparisons in this section exclude the effect of this charge. The Company anticipates significant year-over-year increases in Coal Mining operating profit and Segment Adjusted EBITDA in the 2024 fourth quarter. This anticipated improvement is primarily due to higher earnings at the unconsolidated coal mining operations driven primarily by an expectation for increased deliveries, as well as a higher per ton management fee at Falkirk. An anticipated improvement in results at Mississippi Lignite Mining Company due to an increase in the index-based sales price partly offset by a reduction in customer demand is also expected to contribute to the profit improvement. Full-year 2024 results are also expected to increase compared with 2023.
Capital expenditures are expected to be approximately $4 million in the fourth quarter of 2024 and $12 million for the 2024 full year.
North American Mining Results
Q3 2024
Q3 2023
(in thousands)
Tons delivered
12,005
15,410
Q3 2024
Q3 2023
(in thousands)
Revenues
$
32,326
$
21,722
Operating (loss) profit
$
(474)
$
866
Segment Adjusted EBITDA(1)
$
2,198
$
2,924
(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 significantly year-over-year, primarily due to an increase in reimbursed costs, which have an offsetting amount in cost of goods sold and therefore no impact on gross profit. Favorable pricing and delivery mix at the limestone quarries also contributed to the increased revenues. The effect of lower customer deliveries, primarily due to an increase in planned customer outages and significant rain events in Florida during the third quarter of 2024, partly offset the revenue increase.
Despite higher revenues, operating results and Segment Adjusted EBITDA declined in third-quarter 2024 compared with 2023. These decreases were mainly the result of a $0.9 million charge to establish a reserve against a customer receivable during the quarter, as well as higher supplies and labor-related expenses.
North American Mining Outlook
North American Mining expects the 2024 fourth quarter and full-year operating profit and Segment Adjusted EBITDA to increase year-over-year. The fourth quarter results are also anticipated to improve over the 2024 third quarter. These improvements are primarily due to the late 2023 amendment of limestone contracts to more mutually advantageous contract terms and a scope of work expansion with another customer.
Sawtooth Mining is the exclusive provider of comprehensive mining services at Thacker Pass, which is owned by Lithium Americas Corp. (TSX:LAC) (NYSE:LAC). Sawtooth Mining will supply all of the lithium-bearing ore requirements for Thacker Pass, which is currently under construction. Sawtooth will be reimbursed for costs of mining, capital expenditures and mine closure and will recognize a contractually agreed upon production fee once the mine is operating. In addition to providing comprehensive mining services, Sawtooth Mining is currently assisting with certain construction services and will transport clay tailings once lithium production commences. Phase 1 lithium production is estimated to begin in 2027. Prior to that time, the Company expects to continue to recognize moderate income.
North American Mining expects full-year 2024 capital expenditures to be approximately $26 million, with approximately $12 million expended in the fourth quarter.
Minerals Management Results
Q3 2024
Q3 2023
(in thousands)
Revenues
$ 8,849
$ 5,747
Operating profit
$ 6,188
$ 3,610
Segment Adjusted EBITDA(1)
$ 7,280
$ 4,378
(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 third-quarter 2024 revenues, operating profit and Segment Adjusted EBITDA improved significantly over the prior year quarter. These improvements were primarily due to higher production volumes, mainly from assets acquired late in 2023.
Minerals Management Outlook
Operating profit and Segment Adjusted EBITDA for the 2024 fourth quarter and full year are expected to decrease compared with the respective 2023 periods, excluding the fourth-quarter 2023 impairment charge of $5.1 million and a $4.5 million gain on sale recognized in the 2024 second quarter. These declines are primarily driven by current market expectations for natural gas and oil prices, as well as development and production assumptions on currently owned reserves.
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 $20 million in the 2024 fourth quarter. Future investments are expected to be accretive, but each investment's contribution to near-term earnings is dependent on the details of that investment, including the size and type of interests acquired and the stage and timing of mineral development.
Consolidated Outlook
Fourth-quarter 2023 results included a $65.9 million pre-tax impairment charge. Comparisons in this section exclude the effect of this charge. Overall, fourth-quarter and full-year 2024 consolidated operating profit and Adjusted EBITDA are expected to increase significantly year-over-year. These improvements are primarily due to anticipated increases in profitability at the Coal Mining segment from improved results at Mississippi Lignite Mining Company, Falkirk and Coteau. North American Mining's growth and profit improvement initiatives are also expected to contribute to the improved earnings. Full-year 2024 net income is expected to increase significantly over 2023.
Full-year 2024 consolidated capital expenditures are expected to total approximately $69 million, which includes approximately $11 million for Unallocated capital expenditures, primarily at Mitigation Resources of North America®. During the 2024 fourth quarter, the Company expects to expend up to $38 million, including $20 million related to Minerals Management. In 2024, cash flow before financing activities is expected to be a use of cash.
2025 Perspectives & Long-term Growth and Diversification
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. Management is confident in the Company's trajectory and business prospects as it prepares for 2025 and longer-term growth opportunities.
While the Company realizes the coal mining industry faces political and regulatory challenges and overall demand for coal is projected to decline over the longer-term, management believes coal should be an essential part of the energy mix in the United States for the foreseeable future. The Company anticipates continued solid customer demand at its coal mining operations in 2025 and will benefit from the absence of temporary price concessions at Falkirk. Cost inflation is anticipated to affect Mississippi Lignite Mining Company's 2025 results.
North American Mining expects to build on its current 2024 momentum to deliver further improved results in 2025. Benefits from new and amended contracts, and new business expansion opportunities, are expected to generate improved 2025 results on expectations for comparable year-over-year customer demand. 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.
The Minerals Management segment, through its Catapult Mineral Partners business, is constructing a high-quality, diversified portfolio of oil and gas mineral and royalty interests in the United States that are expected to deliver near-term cash flow yields and long-term projected growth. The current portfolio provides a strong foundation of well-positioned assets that are expected to continue to deliver solid financial results. While the timing of returns could vary, the Company maintains a long-term perspective. Given current trends in oil and natural gas prices and projected volumes, the Company anticipates a moderate production decline in 2025. The Company believes the Minerals Management business will provide unlevered after-tax returns on invested capital in the mid-teens as it matures.
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. Mitigation Resources 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 Tennessee, Mississippi, Alabama, Texas, Florida and Pennsylvania. In addition, Mitigation Resources is providing ecological restoration services for abandoned surface mines, as well as pursuing additional environmental restoration projects. It was named a designated provider of abandoned mine ...
