Alliance Resource Partners(ARLP) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2024 was $613.6 million, down 3.6% from$ 636.5 million in the prior year, but up 3.4% sequentially due to higher coal sales tons [12] - Net income attributable to ARLP was $86.3 million or$ 0.66 per unit, compared to $153.7 million or$ 1.18 per unit in the year-ago period [12] - Adjusted EBITDA for Q3 2024 was $170.4 million, down from$ 227.6 million in the prior-year period, reflecting lower revenues and higher operating costs [12] Business Line Data and Key Metrics Changes - Coal sales volumes were 8.4 million tons, essentially in line with the 2023 quarter, but increased 6.7% sequentially [6] - Coal production was 7.8 million tons, down 7.2% year-over-year and 8.1% sequentially [6] - In the Illinois Basin, tons sold increased by 3.1% sequentially, while in Appalachia, tons sold increased by 16.9% compared to the previous quarter [7] Market Data and Key Metrics Changes - Average realized coal sales price per ton sold was $63.57, down 2.1% year-over-year and 2.6% sequentially [8] - Oil and Gas Royalties segment volumes reached 864,000 barrels of oil equivalent, representing an 11.9% increase year-over-year and a 5.8% increase sequentially [11] - Coal royalty volumes increased by 2.3% year-over-year, while coal royalty revenue per ton decreased by 3% compared to the prior year [11] Company Strategy and Development Direction - The company is maintaining its full-year guidance for coal sales volumes and prices, expecting to be closer to the lower end of the ranges [17] - Major capital and infrastructure projects are being advanced to improve productivity and reduce costs starting in early 2025 [22] - The company is focused on leveraging its well-capitalized operations to grow market share amid increasing demand for coal due to electricity needs [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the underlying demand for coal is expected to grow due to nontraditional demand from data centers and AI [23] - The company anticipates that the push for electrification will require more reliable generation capacity, which coal can provide [25] - Management expressed confidence in the long-term fundamentals for electricity demand and the company's position to benefit from this growth [29] Other Important Information - The company generated$ 209.3 million in cash flow from operating activities in Q3 2024 [13] - Total and net leverage ratios were 0.64 and 0.39 times total debt to trailing 12 months adjusted EBITDA, with liquidity at $657.7 million [13] - The company is actively pursuing acquisitions in the oil and gas royalties segment, closing$ 10.5 million in transactions during the quarter [27] Q&A Session Summary Question: Opportunities for ramping up export sales in Q4 - Management indicated there are opportunities to participate in the export market in Q4, with ongoing discussions with partners [31] Question: Inventory drawdown expectations - Current inventory at quarter-end was approximately 2 million tons, with expectations to reduce to 0.5 million to 1 million tons by year-end [33] Question: Cost challenges in Appalachia - Management acknowledged that Appalachian costs are above guidance due to challenging mining conditions but noted improvements are expected [35][36] Question: Outlook for committed and priced tons in 2025 - The company added 5.9 million tons of committed and priced tons, primarily from domestic customers, with expectations for margins to remain around 30% [37] Question: Steps to address roof control and maintenance expenses - Management highlighted geological challenges but expressed optimism for improved conditions in upcoming mining panels [39][40] Question: Impact of EPA emissions rule - Management believes the EPA emissions rule may be overturned in court, and if Trump is elected, he could reverse it [56][57]