8-K: Warrior Met Coal Reports Lower Q4 and Full Year 2024 Earnings Amid Weak Pricing, Blue Creek Project Progresses

Warrior Met Coal reports a decrease in net income and Adjusted EBITDA for Q4 and full year 2024, impacted by lower steelmaking coal prices, while achieving production milestones and advancing the Blue Creek growth project.

Summary

• Warrior Met Coal reported a net income of $1.1 million for Q4 2024, a significant decrease from $128.9 million in Q4 2023.
• Adjusted EBITDA for Q4 2024 was $53.2 million, compared to $163.7 million in the same period of the previous year.
• For the full year 2024, net income was $250.6 million, down from $478.6 million in 2023.
• Adjusted EBITDA for the full year 2024 was $447.9 million, compared to $698.9 million in 2023.
• The company achieved an 8% increase in production volumes for the full year, reaching run rates not seen since 2019.
• Mine 4 achieved a record high annual production of 2.8 million short tons.
• The company generated $367.4 million in cash from operating activities during 2024.
• Capital expenditures and mine development totaled $488.3 million for the year, primarily for the Blue Creek project.
• Production commenced at the Blue Creek growth project on time and on budget, with 209 thousand short tons produced for the year.
• The preparation plant at Blue Creek is expected to be completed in the middle of 2025, and the longwall startup is expected no later than the second quarter of 2026.
• The company invested $104.1 million in Blue Creek development during Q4, bringing the total project spend to $716.5 million.
• Sales volumes for the full year 2024 increased by 6% to 8.0 million short tons.
• The average net selling price of steelmaking coal decreased by 34% in Q4 2024 to $154.54 per short ton.
• The company expects to sell 8.2 to 9.0 million short tons of coal in 2025.
• The company expects to produce 7.8 to 8.6 million short tons of coal in 2025.
• Capital expenditures for the Blue Creek project are projected to be $225 to $250 million in 2025.
• Mine development costs for the Blue Creek project are projected to be $95 to $110 million in 2025.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While earnings are down, the company is making progress on the Blue Creek project and providing dividends. The outlook is cautiously optimistic, dependent on market recovery.

Positives

• The company achieved an 8% increase in production volumes for the full year, reaching run rates not seen since 2019.
• Mine 4 achieved record high annual production of 2.8 million short tons.
• The company generated $367.4 million in cash from operating activities during 2024.
• The Blue Creek growth project commenced production on time and on budget, producing 209 thousand short tons in 2024.
• Sales volumes for the full year 2024 increased by 6% to 8.0 million short tons.
• Cash cost of sales (free-on-board port) per short ton decreased to $119.55 in the fourth quarter of 2024 from $120.69 in the fourth quarter of 2023.
• The company declared a regular quarterly cash dividend of $0.08 per share, payable on March 3, 2025.
• The company met or exceeded all guidance targets for the full year.

Negatives

• Net income for Q4 2024 was $1.1 million, significantly lower than the $128.9 million reported in Q4 2023.
• Adjusted EBITDA for Q4 2024 decreased to $53.2 million from $163.7 million in the prior year's quarter.
• Full-year 2024 net income was $250.6 million, a decrease from $478.6 million in 2023.
• The average net selling price of steelmaking coal decreased by 34% in Q4 2024 to $154.54 per short ton.
• Cash flows from operating activities decreased from $701.1 million in 2023 to $367.4 million in 2024.

Risks

• The company's outlook for 2025 is subject to market conditions in the steel and steelmaking coal industries.
• Overall global economic and competitive conditions could impact performance.
• Planned longwall moves in 2025 could affect production.
• A new labor contract and inflationary pressures could impact costs.
• The company's ability to develop Blue Creek is subject to various operational and financial risks.

Future Outlook

The company anticipates coal sales of 8.2 to 9.0 million short tons and coal production of 7.8 to 8.6 million short tons in 2025, with capital expenditures for the Blue Creek project expected to be $225 to $250 million.

Management Comments

• Walt Scheller, CEO of Warrior, stated that the company delivered a strong operational and financial performance in Q4 2024 despite low steelmaking coal prices.
• Scheller noted that 2024 was an extremely successful year, with the company meeting or exceeding all guidance targets and commencing production at Blue Creek.
• Scheller expressed confidence in the total project capital expenditure estimate of $995 million to $1.075 billion for Blue Creek.
• Management expects Blue Creek to be a significant driver of growth when global steel prices rebound, increasing annual High Vol A production by 4.8 million short tons.

Industry Context

The report indicates that Warrior Met Coal faced challenges due to excess Chinese steel exports, weaker demand, and ample supply of steelmaking coals, leading to lower prices. The company's focus on the Blue Creek project positions it to capitalize on future rebounds in global steel prices and enhance its competitive position.

Comparison to Industry Standards

• Warrior Met Coal's average gross selling price realization was approximately 86% of the Platts Premium Low Vol FOB Australian index price for the fourth quarter and 89% for the full year 2024.
• The company aims to drive its cash costs further into the first quartile globally with the addition of Blue Creek, suggesting a focus on cost competitiveness compared to other steelmaking coal producers.

Stakeholder Impact

• Shareholders will receive a regular quarterly dividend of $0.08 per share.
• Employees are subject to potential changes related to a new labor contract.
• Customers may benefit from increased production and improved cost structure with the Blue Creek project.
• Suppliers are involved in the ongoing development of the Blue Creek project.
• Creditors are exposed to the company's ability to manage debt and generate cash flow.

Next Steps

• Complete the preparation plant at Blue Creek, expected in the middle of 2025.
• Start up the longwall at Blue Creek, expected no later than the second quarter of 2026.
• Monitor market conditions in the steel and steelmaking coal industries.
• Manage capital expenditures for sustaining existing mines and developing Blue Creek.
• Negotiate a new labor contract.

Key Dates