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01/11 03:07
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mix of positive and cautious elements. Strong production and sales volume growth, strategic cost management, and optimistic guidance for Blue Creek support a positive outlook. Despite weak market conditions and cost guidance concerns, management's focus on contracted sales and market expansion in Asia is promising. The Q&A reveals a cautious but optimistic sentiment from analysts, with some uncertainties around cost guidance. Given the company's market cap, the stock is likely to experience a positive movement, estimated between 2% and 8%, over the next two weeks.
Net Income $6 million in Q2 2025, a decrease from $71 million in Q2 2024. This decline was primarily driven by 30% lower average net selling prices and a weak market price environment, partially offset by higher sales volume and cost control measures.
Adjusted EBITDA $54 million in Q2 2025, down from $116 million in Q2 2024. The adjusted EBITDA margin was 18% compared to 29% in the previous year. The decrease was due to 30% lower average net selling prices and a higher mix of high vol A coal sold, partially offset by lower production costs and higher sales volume.
Total Revenues $298 million in Q2 2025, a decrease from $397 million in Q2 2024. The $99 million decline was primarily due to a $120 million decrease in average gross selling prices and a $12 million impact from a higher mix of high vol A volumes sold, partially offset by a $22 million increase from higher sales volumes.
Sales Volume 2.2 million short tons in Q2 2025, up 6% from 2.1 million short tons in Q2 2024. The increase was driven by the first commercial sales from the Blue Creek mine, which contributed 239,000 tons.
Production Volume 2.3 million short tons in Q2 2025, up 6% from 2.2 million short tons in Q2 2024. The increase was attributed to the performance of existing mines and the contribution of 348,000 short tons from the Blue Creek mine.
Cash Cost of Sales $225 million in Q2 2025, down from $260 million in Q2 2024. The $35 million decrease was driven by $50 million in lower variable transportation and royalty costs due to lower steelmaking coal prices, partially offset by a $15 million increase in costs associated with higher sales volumes.
Cash Cost of Sales Per Short Ton $101 in Q2 2025, down from $124 in Q2 2024. The decrease was due to lower variable transportation and royalty costs, cost management at legacy mines, and the initial sales of low-cost Blue Creek tons.
Cash Margin Per Short Ton $29 in Q2 2025, down from $62 in Q2 2024. The decrease was attributed to lower average net selling prices.
SG&A Expenses $12 million in Q2 2025, down $4 million from Q2 2024. The decrease was due to lower employee-related expenses and professional fees.
Capital Expenditures (CapEx) $94 million in Q2 2025, with $75 million for CapEx spending and $19 million for Blue Creek mine development. This was tightly managed, with $52 million allocated to Blue Creek and $23 million to existing mines.
Free Cash Flow Negative $57 million in Q2 2025, resulting from $37 million in cash flows from operating activities, less $94 million in capital expenditures and mine development. Excluding Blue Creek investments, the underlying business generated approximately $40 million in free cash flow.
Blue Creek longwall startup: The startup has been accelerated to early Q1 2026, with first commercial sales of steelmaking coal achieved a quarter ahead of schedule in Q2 2025. 239,000 tons of steelmaking coal were sold, marking a transition from capital investment to revenue generation.
Geographic sales distribution: For the first time, over 50% of sales volume was into Asia, with no sales to China due to tariffs. Sales distribution was 52% Asia, 37% Europe, and 11% South America.
Cost management: Cash cost of sales per short ton decreased to $101 in Q2 2025 from $124 in Q2 2024, driven by lower transportation and royalty costs, and efficient spending management.
Production and sales volume: Production volume increased by 6% year-over-year to 2.3 million short tons, while sales volume also rose by 6% to 2.2 million short tons.
Blue Creek development: $94 million was spent on CapEx and mine development in Q2 2025, with $52 million allocated to Blue Creek. The project remains on budget, with total expenditures to date at $823 million.
Market Conditions: The company is facing significant market pressure due to excess Chinese steel exports, lackluster global steel demand, and a well-supplied steelmaking coal market. This has led to a 24% decline in average premium low-vol steelmaking coal index prices compared to the same quarter last year and a 33% year-over-year decline through June.
Pricing Challenges: The relative price of the LV HCC index compared to the PLV index has significantly decreased, reaching a multiyear low point of 76% during the second quarter. This has impacted the company's gross price realization, which was lower than the annual target range.
Geopolitical and Trade Risks: Retaliatory tariffs by China on U.S. imports have made sales from the U.S. into China uneconomical, resulting in no sales into China this year. Additionally, global trade uncertainty continues to impact steel demand and pricing.
Economic Uncertainty: Global pig iron production decreased by 1.3% in the first half of 2025, with declines in China and the rest of the world, except for India. Tepid global economic activity is contributing to reduced steel demand.
Operational Costs and Maintenance: While the company has managed costs effectively, underground mining operations place significant strain on machinery, leading to potential increases in repairs and maintenance expenses in the second half of the year.
Supply Chain and Inventory Management: The company has maintained consistent coal inventory levels, but higher inventory of Blue Creek supplies has influenced working capital. Additionally, the ramp-up of Blue Creek mine development costs is expected to increase in the second half of 2025.
Strategic Execution Risks: The development of the Blue Creek mine, while ahead of schedule, involves significant capital investment and operational risks. The total project cost is estimated at $995 million to $1.075 billion, and any delays or cost overruns could impact financial performance.
Blue Creek Longwall Startup: The startup of the Blue Creek longwall has been accelerated to early Q1 2026, ahead of schedule. The mine is expected to produce 1 million short tons of steelmaking coal for the full year 2025.
Blue Creek Development Costs: Development costs for the Blue Creek project are expected to increase in the second half of 2025 as operations ramp up toward the longwall startup.
Blue Creek Capital Expenditures: The total project capital expenditures for Blue Creek remain on budget, with a baseline estimate ranging from $995 million to $1.075 billion.
Market Conditions and Pricing: The company expects challenging market conditions and pricing for the remainder of 2025, driven by excess Chinese steel exports, weak global steel demand, and well-supplied steelmaking coal markets. Supply rationalization is anticipated to balance the market.
Tax Benefits from Legislation: The One Big Beautiful Bill Act is expected to positively impact Warrior Met Coal through tax credits for metallurgical coal production from 2026 to 2029 and other tax benefits.
Customer Market Challenges: Customer markets are expected to face demand challenges over the next several quarters, with uncertainty surrounding global trade and tariffs potentially adding pressure on seaborne pricing.
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The earnings call reveals a mixed picture: strong production and sales volume increases, but revenue growth is minimal due to lower selling prices. Cash flow is negative, and management is vague about future production and pricing. However, the early Blue Creek start-up and plans for increased dividends and potential buybacks are positive. The market cap suggests moderate volatility, leading to a neutral prediction (-2% to 2%) for stock price movement over the next two weeks.
The earnings call presents a mix of positive and cautious elements. Strong production and sales volume growth, strategic cost management, and optimistic guidance for Blue Creek support a positive outlook. Despite weak market conditions and cost guidance concerns, management's focus on contracted sales and market expansion in Asia is promising. The Q&A reveals a cautious but optimistic sentiment from analysts, with some uncertainties around cost guidance. Given the company's market cap, the stock is likely to experience a positive movement, estimated between 2% and 8%, over the next two weeks.
The earnings call reveals mixed signals: while production and sales volumes increased, revenue and cash margins decreased significantly. The Q&A highlights management's cautious optimism about pricing and volume, but also indicates uncertainties in market conditions. Although Blue Creek investments are progressing well, weak financial results and guidance, coupled with management's unclear responses, balance out the positives. Given the company's mid-sized market cap, the stock price is likely to remain stable, resulting in a neutral sentiment.
The earnings call reveals significant challenges: a net loss, declining revenues, and reduced margins due to lower selling prices. Despite cost management efforts, the market environment remains weak, with uncertain trade policies and no share repurchase program. The Q&A session reflects cautious optimism but lacks concrete positive developments. The company's guidance is based on a $200 metric ton price, but market conditions are unpredictable. Given the negative financial performance and market outlook, the stock price is likely to decline by 2% to 8% over the next two weeks.
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