Warrior Upgraded by S&P to ‘BB-’ with Stable Outlook

Rhea-AI Summary

Warrior Met Coal (NYSE:HCC) has received an upgrade from S&P Global Ratings, raising its Corporate Family Rating to 'BB-' from 'B+' with a Stable Outlook. S&P also elevated the issue-level rating on Warrior's senior secured notes to 'BB+'. The upgrade reflects Warrior's consecutive years of very low leverage, robust earnings, and strong credit metrics. S&P expects Warrior's free cash flow to remain positive despite increased growth capex for the Blue Creek project. Warrior's CFO, Dale W. Boyles, expressed satisfaction with the recognition of the company's strong balance sheet and financial performance. Warrior is a U.S.-based supplier of metallurgical coal to the global steel industry, operating efficient longwall mines in Alabama.

Positive

• S&P Global Ratings upgraded Warrior Met Coal's Corporate Family Rating to 'BB-' from 'B+'
• Issue-level rating on senior secured notes raised to 'BB+'
• Company has maintained very low leverage and robust earnings for consecutive years
• Free cash flow expected to remain positive despite elevated growth capex
• Strong balance sheet and consistent financial performance recognized

Negative

• None.

Insights

Financial Analyst

S&P's upgrade of Warrior Met Coal's Corporate Family Rating to 'BB-' from 'B+' is a significant positive development for the company. This upgrade reflects Warrior's strong financial performance and robust balance sheet. Key factors contributing to this upgrade include:

• Consecutive years of very low leverage
• Robust earnings
• Ample cushion in credit metrics to withstand earnings volatility

The upgrade of the senior secured notes to 'BB+' further underscores the company's improved creditworthiness. This rating action could potentially lead to lower borrowing costs for Warrior in the future, enhancing its financial flexibility.

Despite elevated growth capex associated with the Blue Creek project, S&P expects Warrior's free cash flow to remain positive. This indicates the company's ability to fund growth initiatives while maintaining financial stability. The stable outlook suggests S&P's confidence in Warrior's ability to maintain its improved financial position in the near to medium term.

For investors, this upgrade signals reduced financial risk and potentially improved access to capital markets. However, it's important to monitor the progress of the Blue Creek project and its impact on the company's financial metrics going forward.

Market Research Analyst

Warrior Met Coal's rating upgrade comes at an interesting time for the metallurgical coal market. As a supplier to the global steel industry, Warrior's performance is closely tied to steel production trends. Here are some key market insights:

• The metallurgical coal market has been volatile in recent years, affected by factors such as China's import policies and global economic conditions.
• Despite challenges, Warrior has maintained strong financial performance, indicating effective management of market fluctuations.
• The company's focus on premium quality met coal (HCC) from the Blue Creek coal seam positions it well in the market, as this type of coal is highly sought after by steelmakers.

The Blue Creek growth project mentioned in the release is a strategic move that could significantly enhance Warrior's market position. This project demonstrates the company's commitment to long-term growth and could potentially increase its market share in the premium HCC segment.

Warrior's export-oriented business model, serving customers in Europe, South America and Asia, provides geographic diversification. This could help mitigate risks associated with regional economic downturns or trade disputes.

Investors should keep an eye on global steel production trends, particularly in Warrior's key export markets, as these will directly impact demand for the company's products. Additionally, monitoring environmental regulations in target markets will be crucial, as these could affect the long-term demand for metallurgical coal in steel production.

BROOKWOOD, Ala.--(BUSINESS WIRE)-- Warrior Met Coal, Inc. (NYSE:HCC) (“Warrior” or the “Company”) today announced that S&P Global Ratings (“S&P”) has upgraded its Corporate Family Rating (“CFR”) to ‘BB-’ from ‘B+’ on Balance Sheet Strength with a Stable Outlook. In addition, S&P raised its issue-level rating on the Company’s senior secured notes to ‘BB+.’

According to S&P, the upgrade reflects consecutive years of very low leverage, robust earnings, and ample cushion in credit metrics to withstand earnings volatility. Free cash flow is expected to remain positive despite elevated growth capex associated with Blue Creek.

“We are pleased with S&P’s recognition of the Company’s strong balance sheet and financial performance over the last few years in which we delevered the Company and generated consistent incremental returns for stockholders, while at the same time investing for growth through our world class Blue Creek growth project,” said Dale W. Boyles, Chief Financial Officer of Warrior.

About Warrior

Warrior is a U.S.-based, environmentally, and socially minded supplier to the global steel industry. It is dedicated entirely to mining non-thermal metallurgical (met) coal used as a critical component of steel production by metal manufacturers in Europe, South America, and Asia. Warrior is a large-scale, low-cost producer and exporter of premium quality met coal, also known as hard coking coal (“HCC”), operating highly efficient longwall operations in its underground mines based in Alabama. The HCC that Warrior produces from the Blue Creek coal seam contains very low sulfur and has strong coking properties. The premium nature of Warrior’s HCC makes it ideally suited as a base feed coal for steel makers. For more information, please visit www.warriormetcoal.com.

Forward-Looking Statements

This press release contains, and the Company’s officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements, including statements regarding earnings volatility, free cash flow and expected capital expenditures. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “project,” “target,” “foresee,” “should,” “would,” “could,” “potential,” “outlook,” “guidance” or other similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements represent management’s good faith expectations, projections, guidance, or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, without limitation, fluctuations or changes in the pricing or demand for the Company’s coal (or met coal generally) by the global steel industry; the impact of global pandemics, such as the novel coronavirus ("COVID-19") pandemic, on its business and that of its customers, including the risk of a decline in demand for the Company's met coal due to the impact of any such pandemic on steel manufacturers; the impact of inflation on the Company, the impact of geopolitical events, including the effects of the Russia-Ukraine war; the inability of the Company to effectively operate its mines and the resulting decrease in production; the inability of the Company to transport its products to customers due to rail performance issues or the impact of weather and mechanical failures at the McDuffie Terminal at the Port of Mobile; federal and state tax legislation; changes in interpretation or assumptions and/or updated regulatory guidance regarding the Tax Cuts and Jobs Act of 2017; legislation and regulations relating to the Clean Air Act and other environmental initiatives; regulatory requirements associated with federal, state and local regulatory agencies, and such agencies’ authority to order temporary or permanent closure of the Company’s mines; operational, logistical, geological, permit, license, labor and weather-related factors, including equipment, permitting, site access, operational risks and new technologies related to mining and labor strikes or slowdowns; the timing and impact of planned longwall moves; the Company’s obligations surrounding reclamation and mine closure; inaccuracies in the Company’s estimates of its met coal reserves; any projections or estimates regarding Blue Creek, including the expected returns from this project, if any, and the ability of Blue Creek to enhance the Company's portfolio of assets, the Company's expectations regarding its future tax rate as well as its ability to effectively utilize its net operating losses to reduce or eliminate its cash taxes; the Company's ability to develop Blue Creek; the Company’s ability to develop or acquire met coal reserves in an economically feasible manner; significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components; competition and foreign currency fluctuations; fluctuations in the amount of cash the Company generates from operations, including cash necessary to pay any special or quarterly dividend; the Company’s ability to comply with covenants in its ABL Facility or indenture relating to its senior secured notes; integration of businesses that the Company may acquire in the future; adequate liquidity and the cost, availability and access to capital and financial markets; failure to obtain or renew surety bonds on acceptable terms, which could affect the Company’s ability to secure reclamation and coal lease obligations; costs associated with litigation, including claims not yet asserted; and other factors described in the Company’s Form 10-K for the year ended December 31, 2023 and other reports filed from time to time with the Securities and Exchange Commission (the “SEC”), which could cause the Company’s actual results to differ materially from those contained in any forward-looking statement. The Company’s filings with the SEC are available on its website at www.warriormetcoal.com and on the SEC's website at www.sec.gov.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240731961163/en/

For Investors:

Dale W. Boyles, 205-554-6129

dale.boyles@warriormetcoal.com

For Media:

D’Andre Wright, 205-554-6131

dandre.wright@warriormetcoal.com

Source: Warrior Met Coal, Inc.

FAQ

What is Warrior Met Coal's new credit rating from S&P Global Ratings?

S&P Global Ratings has upgraded Warrior Met Coal's (HCC) Corporate Family Rating to 'BB-' from 'B+' with a Stable Outlook.

How has S&P changed the rating on Warrior Met Coal's senior secured notes?

S&P has raised the issue-level rating on Warrior Met Coal's (HCC) senior secured notes to 'BB+'.

What factors contributed to Warrior Met Coal's credit rating upgrade?

The upgrade reflects Warrior Met Coal's (HCC) consecutive years of very low leverage, robust earnings, and ample cushion in credit metrics to withstand earnings volatility.

How is Warrior Met Coal's free cash flow expected to perform?

Despite elevated growth capex associated with the Blue Creek project, Warrior Met Coal's (HCC) free cash flow is expected to remain positive.