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Warrior Met Coal ups production, sales guidance after record Q2'19 sales volumes

Warrior Met Coal Inc. increased its 2019 production and sales guidance in the wake of record-high sales volumes in the second quarter.

The pure-play metallurgical coal miner sold 2.2 million tons of coal during the recent period, an 18.8% increase from the year-ago period, and produced 2.2 million tons, a 13.8% increase, CEO Walter Scheller said on a July 31 earnings call. Warrior's production levels exceeded management's expectations despite a longwall move during the period, Scheller said.

As a result, Warrior increased its full-year guidance for sales and production to between 7.5 million and 7.9 million tons from between 7.1 million and 7.6 million tons.

"The capital investments that we've made in our mines over the last few years continue to pay off as we strive to reach full capacity to improve production efficiencies and better equipment utilization with less downtime and a safe environment," Scheller said.

CFO Dale Boyles said the company's adjusted EBITDA over quarter totaled nearly $176 million, up from nearly $129 million in the year-ago quarter, an increase driven by the high sales volumes and aided by a 4% increase in the average net selling price. Warrior also generated more than $197 million in free cash flow, a record quarterly high for the company.

The company sold 59% of its coal into Europe during the period, 23% into South America and 18% into Asia. The Platts premium low-vol, Australian index price closed $11 per tonne lower from the start of the quarter to the end and dropped by as much as $19 per tonne from its mid-May high, hitting $194 per tonne by the end of June, Scheller said. Market conditions remain strong despite the volatility.

Global steel producers saw a "rapid decline in their margins" between falling finished product prices and increased costs of raw materials, Scheller said. China saw strong production growth of pig iron, while Europe faced softer demand as well as import competition. South America's production was in line with 2018 volumes but "below the heightened expectations of a strong 2019."

"Demand for our premium coal was strong during the quarter despite the margin pressures on our customers," Scheller said.

The company has continued to develop its potential Blue Creek operation, which may deliver about 3 million tons annually over the course of its life, Scheller said. Warrior is working on additional core drilling to gather geological data, evaluating rail transportation partnerships and obtaining permits, among other things, before presenting the project to its board of directors later this year. The company may announce whether it will move forward on the project in late 2019 or early 2020.

The company's second-quarter net income totaled $125.5 million, or $2.43 per diluted share, up from $91.3 million, or $1.72 per diluted share, in the second quarter of 2018.

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