NACCO INDUSTRIES ANNOUNCES FIRST QUARTER 2024 RESULTS
NACCO Industries announced their first-quarter results for 2024, showing a 162% increase in operating profit, a 28% increase in income before taxes, and a decrease in net income due to higher income tax expenses. The company repurchased shares and maintained a conservative capital structure. The Coal Mining segment saw a decline in revenues and operating results, while the North American Mining segment experienced significant growth. The Minerals Management segment showed increased revenue and profit. The company expects improved results in 2024, focusing on growth and diversification.
North American Mining segment's revenue grew by 19% and operating profit by 184% in Q1 2024, indicating substantial growth.
Minerals Management segment saw significant revenue, operating profit, and Segment Adjusted EBITDA increases in Q1 2024, demonstrating positive performance.
The Company expects to generate net income and increased Adjusted EBITDA in 2024 compared to the prior year, driven by improved results in various segments, showcasing positive outlook for the future.
Coal Mining segment experienced a decline in revenues and operating results in Q1 2024 due to lower earnings of unconsolidated operations, indicating a negative performance for that segment.
The Company expects a moderate decrease in operating profit and Segment Adjusted EBITDA for the Minerals Management segment in 2024 compared to the prior year, excluding the 2023 impairment charge, presenting a negative outlook for that segment.
The Company anticipates a non-cash settlement charge in the second half of 2024 related to the termination of its defined benefit pension plan, which may offset the improved 2024 operating results, representing a potential negative impact on the financials.
The first notable indicator here is the substantial rise in operating profit by 162%, despite an overall decline in net income by 19.7% due to higher income tax expenses. The operating profit surge is a positive signal as it indicates effective cost management and operational efficiency improvements. However, investors should remain cautious, given the shift results in a lower net income, which is the end figure that matters to shareholders.
In addition, the report mentions share repurchases, which can be an affirmative sign of management's confidence in the company's intrinsic value. Nevertheless, investors should weigh this against the capital expenditure of
The diversified growth strategy and agility in responding to market demands, such as the transition to solar energy projects, could offer long-term value. But this must be balanced against the short to medium-term risks associated with the capital-intensive nature of these expansions.
The performance metrics provided, such as EBITDA increases and Segment Adjusted EBITDA, can be considered encouraging signs of stability within NACCO's mining operations. Improved results in the Minerals Management and North American Mining segments are particularly noteworthy and may suggest a strengthened position in these markets.
However, the Coal Mining segment's outlook is more nuanced. Given the current environmental and regulatory pressures on the coal industry, NACCO's efforts to manage production costs and optimize efficiencies are important for sustaining this segment. It's essential for investors to monitor market conditions for coal, as well as any progress in NACCO's renewable energy ventures, which could serve as a hedge against the industry's general downtrend.
A key aspect to consider is the company's adaptation to shifting energy market trends, particularly its involvement in the solar energy projects and lithium mining operations, which aligns with the global push for cleaner energy sources. The move towards solar, while capital intensive, may pay dividends in the future as global energy policies continue to favor renewable sources. However, the timeline and returns on these investments are uncertain and should be assessed alongside traditional revenue streams.
Moreover, the phosphate mining contract and the acquisition in the Permian Basin represent strategic moves into sectors that could offer more stable, long-term growth given the ongoing demand for agriculture and petrochemicals.
Consolidated Q1 2024 Highlights:
- Consolidated operating profit of
increased$4.8 million 162% over Q1 2023 - Consolidated income before taxes of
up$5.6 million 28% from Q1 2023 - Income tax expense compared with income tax benefit in Q1 2023 due to shift in mix of earnings
- Consolidated net income of
, or$4.6 million /share versus$0.61 , or$5.7 million /share, in Q1 2023$0.76 - EBITDA of
up$11.2 million 4% from Q1 2023
Three Months Ended | |||||
($ in thousands, except per share amounts) | 3/31/2024 | 3/31/2023 | % Change | ||
Operating Profit | 162.2 % | ||||
Income before taxes | 27.6 % | ||||
Income tax provision (benefit) | n.m. | ||||
Net Income | (19.7) % | ||||
Diluted Earnings/share | (19.7) % | ||||
EBITDA* | 4.4 % |
*Non-GAAP financial measures are defined and reconciled on pages 8 and 9. |
The substantial increase in the Company's 2024 first-quarter operating profit was primarily due to a significant improvement in earnings at the Minerals Management and North American Mining segments. While operating profit improved, net income decreased due to higher income tax expense, attributable to a shift in the mix of earnings and lower other income.
At March 31, 2024, the Company had consolidated cash of
Detailed Discussion of Results
Coal Mining Results
2024 | 2023 | ||
Tons of coal delivered | (in thousands) | ||
Unconsolidated operations | 5,480 | 6,192 | |
Consolidated operations | 455 | 711 | |
Total deliveries | 5,935 | 6,903 | |
2024 | 2023 | ||
(in thousands) | |||
Revenues | $ 15,545 | $ 20,653 | |
Earnings of unconsolidated operations | $ 12,007 | $ 12,466 | |
Operating expenses(1) | $ 7,026 | $ 6,928 | |
Operating profit (loss) | $ (417) | $ 313 | |
Segment Adjusted EBITDA(2) | $ 1,797 | $ 4,553 |
(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. |
First-quarter 2024 revenues decreased primarily due to fewer tons delivered at Mississippi Lignite Mining Company. Customer requirements at Mississippi Lignite Mining Company declined as the power plant served by the mine has been operating with only one of its two boilers since December 2023. Repairs to the affected boiler are expected to be completed during the second half of 2024.
While revenues decreased, the decline in Coal Mining operating results was mainly due to lower earnings of unconsolidated operations. The decrease in earnings of unconsolidated operations was primarily attributable to reduced customer requirements at Coteau.
Coal Mining Outlook
In 2024, the Company expects overall coal deliveries to increase modestly from 2023 levels primarily due to anticipated higher deliveries at Coteau and Falkirk. These improvements are expected to be partly offset by reduced deliveries at Mississippi Lignite Mining Company, due to an ongoing boiler issue, and the cessation of coal deliveries at the Company's Sabine Mine in April 2023.
Strong operating profit compared with a significant 2023 operating loss, which included a
Mississippi Lignite Mining Company expects to incur a loss in 2024, albeit significantly less than in 2023, mainly as a result of fewer tons delivered. While total production costs at Mississippi Lignite Mining Company are anticipated to decrease substantially from 2023 levels, they are expected to remain above historical levels throughout 2024 until deliveries return to normal and a pit extension is completed later this year. In addition, the effect of the impairment charge taken in 2023 will result in lower depreciation and amortization expense and contribute to the lower production costs.
An anticipated increase in 2024 earnings at the unconsolidated coal mining operations is driven primarily by an expectation for increased deliveries at Coteau and Falkirk, as well as a higher per ton management fee at Falkirk beginning in June 2024 when temporary price concessions end.
2024 capital expenditures are expected to total approximately
North American Mining Results
2024 | 2023 | ||
(in thousands) | |||
Tons delivered | 15,173 | 14,829 | |
2024 | 2023 | ||
(in thousands) | |||
Revenues | $ 24,483 | $ 20,633 | |
Operating profit | $ 2,355 | $ 830 | |
Segment Adjusted EBITDA(1) | $ 4,611 | $ 2,716 |
(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
North American Mining Outlook
In 2023, North American Mining executed a 15-year contract to mine phosphate at a quarry in central
Sawtooth Mining has exclusive responsibility for mining and mine closure services at Thacker Pass, including mine design, construction, operation and maintenance. Thacker Pass is owned by Lithium Americas Corp. (TSX: LAC) (NYSE: LAC). Thacker Pass will supply all of Lithium Americas' lithium-bearing ore requirements. In March 2023, Lithium Americas commenced construction at Thacker Pass. With construction underway, Sawtooth acquired mining equipment totaling
In 2024, capital expenditures are expected to be approximately
Minerals Management Results
2024 | 2023 | ||
(in thousands) | |||
Revenues | $ 10,401 | $ 8,285 | |
Operating profit | $ 7,930 | $ 6,044 | |
Segment Adjusted EBITDA(1) | $ 8,923 | $ 6,855 |
(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 revenue, operating profit and Segment Adjusted EBITDA increased significantly over the 2023 first quarter due to higher production volumes by third-party lessees.
Minerals Management Outlook
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.
In December 2023, Minerals Management completed a significant acquisition of mineral interests within the Midland Basin, the eastern sub-basin of the oil-rich Permian Basin, which included 43.4 thousand gross acres and 2.5 thousand net royalty acres. This acquisition is expected to continue to be accretive to 2024 earnings and provide opportunities for longer-term growth.
In 2024, operating profit and Segment Adjusted EBITDA are expected to decrease moderately compared with the prior year, excluding the 2023 impairment charge of
Development of additional wells on existing interests in excess of current expectations, or acquisitions of additional interests, could be accretive to future results.
In 2024, Minerals Management is targeting additional investments of up to
Mitigation Resources of North America Outlook
Mitigation Resources of
Consolidated Outlook
Overall, the Company expects to generate net income in 2024 compared with the substantial 2023 consolidated net loss, which included a
The Company is taking steps to terminate its defined benefit pension plan in 2024. In connection with this action, NACCO is anticipating a non-cash settlement charge in the second half of the year, which is expected to partly offset the improved 2024 operating results.
Consolidated capital expenditures are expected to total approximately
Long-term Growth and Diversification
Management is focused on transforming NACCO into a broad-based natural resources company and is optimistic about the Company's long-term business outlook. 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. The Company believes its businesses have competitive advantages that provide value to customers and create long-term value for stockholders. The Company is pursuing growth and diversification by strategically leveraging its core mining and natural resources management skills to build a strong portfolio of affiliated businesses. Opportunities for growth remain strong. Acquisitions of additional mineral interests and improvements in the outlook for Coal Mining segment customers, as well as new contracts at Mitigation Resources and North American Mining should be accretive to the Company's outlook.
The Minerals Management segment continues to pursue acquisitions of mineral and royalty interests in
North American Mining is focused on continuing to evaluate new business opportunities and drive profitable growth in line with refined strategic objectives. After pausing on business development in early 2023, North American Mining has better identified how to enhance operational excellence, where to focus and scale, and how to drive profitable growth. 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.
Mitigation Resources continues to expand its business, which creates and sells stream and wetland mitigation credits, provides services to those engaged in permittee-responsible mitigation and provides other environmental restoration services. This business offers an opportunity for growth and diversification in an industry where the Company has substantial knowledge and expertise and a strong reputation. The Company believes that Mitigation Resources can provide solid rates of return on capital employed as this business matures.
NACCO also continues to pursue activities which can strengthen the resiliency of its existing coal mining operations. The Company remains focused on managing coal production costs and maximizing efficiencies and operating capacity at mine locations to help customers with management fee contracts be more competitive. These activities benefit both customers and the Company's Coal Mining segment, as fuel cost is a significant driver for power plant dispatch. Increased power plant dispatch results in increased demand for coal by the Coal Mining segment's customers. Fluctuating natural gas prices, weather and availability of renewable energy sources, such as wind and solar, could affect the amount of electricity dispatched from coal-fired power plants. While the Company realizes the coal mining industry faces political and regulatory challenges and demand for coal is projected to decline over the longer-term, the Company believes coal should be an essential part of the energy mix in
The Company continues to look for ways to create additional value by utilizing its core mining competencies which include reclamation and permitting. The Company is working to utilize these skills through development of utility-scale solar projects on reclaimed mining properties. Reclaimed mining properties offer large tracts of land that could be well-suited for solar and other energy-related projects. These projects could be developed by the Company itself or through joint ventures that include partners with expertise in energy development projects. In 2023, NACCO formed ReGen Resources to pursue such projects, including the development of a solar farm on reclaimed land at Mississippi Lignite Mining Company.
NACCO is committed to maintaining a conservative capital structure as it continues to grow and diversify, while avoiding unnecessary risk. The Company believes strategic diversification will generate cash that can be re-invested to strengthen and expand the businesses. The Company also continues to maintain the highest levels of customer service and operational excellence with an unwavering focus on safety and environmental stewardship.
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Conference Call
In conjunction with this news release, the management of NACCO Industries will host a conference call on Thursday, May 2, 2024 at 8:30 a.m. Eastern Time. The call may be accessed by dialing (877) 550-1875 (North America Toll Free) or (848) 488-9180 (International), Conference ID: 9435, or over the Internet through NACCO Industries' website at ir.nacco.com/home. For those not planning to ask a question of management, the Company recommends listening to the call via the online webcast. Please allow 15 minutes to register, download and install any necessary audio software required to listen to the webcast. A replay of the call will be available shortly after the call ends through May 9, 2024. An archive of the webcast will also be available on the Company's website approximately two hours after the live call ends.
Non-GAAP and Other Measures
This release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in this release are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with
Forward-looking Statements Disclaimer
The statements contained in this news release that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) changes to or termination of customer or other third-party contracts, or a customer or other third party default under a contract, (2) any customer's premature facility closure or extended project development delay, (3) regulatory actions, including the United States Environmental Protection Agency's 2023 proposed rules relating to mercury and greenhouse gas emissions for coal-fired power plants, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (4) a significant reduction in purchases by the Company's customers, including as a result of changes in coal consumption patterns of
About NACCO Industries
NACCO Industries® brings natural resources to life by delivering aggregates, minerals, reliable fuels and environmental solutions through its robust portfolio of NACCO Natural Resources businesses. Learn more about our companies at nacco.com, or get investor information at ir.nacco.com.
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NACCO INDUSTRIES, INC. AND SUBSIDIARIES | |||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||
THREE MONTHS ENDED | |||
MARCH 31 | |||
2024 | 2023 | ||
(In thousands, except per share data) | |||
Revenues | $ 53,289 | $ 50,141 | |
Cost of sales | 46,271 | 46,784 | |
Gross profit | 7,018 | 3,357 | |
Earnings of unconsolidated operations | 13,307 | 13,824 | |
Operating expenses | |||
Selling, general and administrative expenses | 15,453 | 14,876 | |
Amortization of intangible assets | 126 | 727 | |
Gain on sale of assets | (11) | (236) | |
15,568 | 15,367 | ||
Operating profit | 4,757 | 1,814 | |
Other (income) expense | |||
Interest expense | 1,111 | 545 | |
Interest income | (1,127) | (1,155) | |
Closed mine obligations | 455 | 409 | |
Gain on equity securities | (1,041) | (628) | |
Other, net | (214) | (1,725) | |
(816) | (2,554) | ||
Income before income tax provision (benefit) | 5,573 | 4,368 | |
Income tax provision (benefit) | 1,003 | (1,324) | |
Net income | $ 4,570 | $ 5,692 | |
Earnings per share: | |||
Basic earnings per share | $ 0.61 | $ 0.77 | |
Diluted earnings per share | $ 0.61 | $ 0.76 | |
Basic weighted average shares outstanding | 7,452 | 7,428 | |
Diluted weighted average shares outstanding | 7,515 | 7,515 |
EBITDA RECONCILIATION (UNAUDITED) | |||
THREE MONTHS ENDED | |||
MARCH 31 | |||
2024 | 2023 | ||
(in thousands) | |||
Net income | $ 4,570 | $ 5,692 | |
Income tax provision (benefit) | 1,003 | (1,324) | |
Interest expense | 1,111 | 545 | |
Interest income | (1,127) | (1,155) | |
Depreciation, depletion and amortization expense | 5,692 | 7,019 | |
Consolidated EBITDA* | $ 11,249 | $ 10,777 |
*EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures. NACCO defines EBITDA as net income before income taxes, net interest expense and depreciation, depletion and amortization expense. EBITDA is not a measure under |
NACCO INDUSTRIES, INC. AND SUBSIDIARIES | |||||||||||
FINANCIAL SEGMENT HIGHLIGHTS AND SEGMENT ADJUSTED EBITDA RECONCILIATIONS (UNAUDITED) | |||||||||||
Three Months Ended March 31, 2024 | |||||||||||
Coal Mining | North | Minerals | Unallocated | Eliminations | Total | ||||||
(In thousands) | |||||||||||
Revenues | $ 15,545 | $ 24,483 | $ 10,401 | $ 3,262 | $ (402) | $ 53,289 | |||||
Cost of sales | 20,943 | 21,671 | 1,364 | 2,712 | (419) | 46,271 | |||||
Gross profit (loss) | (5,398) | 2,812 | 9,037 | 550 | 17 | 7,018 | |||||
Earnings of unconsolidated operations | 12,007 | 1,365 | (65) | — | — | 13,307 | |||||
Operating expenses* | 7,026 | 1,822 | 1,042 | 5,678 | — | 15,568 | |||||
Operating profit (loss) | $ (417) | $ 2,355 | $ 7,930 | $ (5,128) | $ 17 | $ 4,757 | |||||
Segment Adjusted EBITDA** | |||||||||||
Operating profit (loss) | $ (417) | $ 2,355 | $ 7,930 | $ (5,128) | $ 17 | $ 4,757 | |||||
Depreciation, depletion and amortization | 2,214 | 2,256 | 993 | 229 | — | 5,692 | |||||
Segment Adjusted EBITDA** | $ 1,797 | $ 4,611 | $ 8,923 | $ (4,899) | $ 17 | $ 10,449 |
Three Months Ended March 31, 2023 | |||||||||||
Coal Mining | North | Minerals | Unallocated | Eliminations | Total | ||||||
(In thousands) | |||||||||||
Revenues | $ 20,653 | $ 20,633 | $ 8,285 | $ 1,191 | $ (621) | $ 50,141 | |||||
Cost of sales | 25,878 | 19,241 | 1,052 | 1,214 | (601) | 46,784 | |||||
Gross profit (loss) | (5,225) | 1,392 | 7,233 | (23) | (20) | 3,357 | |||||
Earnings of unconsolidated operations | 12,466 | 1,358 | — | — | — | 13,824 | |||||
Operating expenses* | 6,928 | 1,920 | 1,189 | 5,330 | — | 15,367 | |||||
Operating profit (loss) | $ 313 | $ 830 | $ 6,044 | $ (5,353) | $ (20) | $ 1,814 | |||||
Segment Adjusted EBITDA** | |||||||||||
Operating profit (loss) | $ 313 | $ 830 | $ 6,044 | $ (5,353) | $ (20) | $ 1,814 | |||||
Depreciation, depletion and amortization | 4,240 | 1,886 | 811 | 82 | — | 7,019 | |||||
Segment Adjusted EBITDA** | $ 4,553 | $ 2,716 | $ 6,855 | $ (5,271) | $ (20) | $ 8,833 |
*Operating expenses consist of Selling, general and administrative expenses, Amortization of intangible assets and (Gain) loss on sale of assets. | |||||||||||
**Segment Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation or as a substitute for GAAP measures. NACCO defines Segment Adjusted EBITDA as operating profit (loss) plus depreciation, depletion and amortization expense. Segment Adjusted EBITDA is not a measure under |
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SOURCE NACCO Industries
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