Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Operating profit increased substantially by 321% year-over-year, driven by a $4.5 million gain on the sale of a legacy land asset.
- Excluding the gain, operating profit still increased over 60% from last year's second quarter.
- North American mining segment delivered strong year-over-year earnings improvement, with operating profit up 39% and segment adjusted EBITDA up 36%.
- Mississippi Lignite Mining Company's Red Hills mine operated more efficiently this quarter, contributing to improved results.
- The company is making meaningful progress in diversifying its North American mining segment, including mining phosphate for a new customer in Florida.
Negative Points
- Coal mining segment revenues decreased due to fewer coal deliveries as a result of the Red Hills power plant running on only one boiler.
- Minerals management's earnings were down year-over-year, primarily due to a 39% decline in revenues driven by lower natural gas and oil prices.
- Operating profit improvements were offset by a $2.6 million year-over-year unfavorable change in other expenses, driven by higher net interest expense and unfavorable changes in the market value of equity securities.
- Mitigation resources of North America business results were down year-over-year due to a change in the mix of projects.
- Projected consolidated net income and adjusted EBITDA are expected to decrease in the second half of 2024 compared with the first half, partly due to an anticipated non-cash pension settlement charge.
Q & A Highlights
Q: Can you discuss the growth prospects for North American mining and where you see the greatest opportunities to add customers?
A: John Butler, President and CEO: We've had considerable success expanding relationships with existing customers and adding new ones. We've diversified geographically and in the range of equipment we operate. We see opportunities in expanding our dragline operations, truck-to-truck shovel operations, and using specialized equipment like surface miners. Additionally, we have future growth under contract, such as the lithium operation in Northern Nevada, which should ramp up in the coming years.
Q: Are aggregate customers expanding business with you because you're better at those tasks?
A: John Butler, President and CEO: Yes, our expertise in mining operations improves productivity and cost positioning for our customers. We help them get the products they need efficiently, which is why they expand business with us.
Q: Are there opportunities to bring on more phosphate customers?
A: John Butler, President and CEO: Absolutely. While our entry into the phosphate market is new, we see potential for adding more phosphate customers in the future.
Q: What would be the capital cost to replenish depleted inventory in mineral management?
A: John Butler, President and CEO: We are on a $20 million per year reinvestment pace, which is growing the business. The cost to just replenish inventory would be less than $20 million, but we don't have an exact number.
Q: Why was oil production down despite last year's investments?
A: John Butler, President and CEO: Unlike other mineral investors, we buy both producing wells and assets that might produce in the future. Not all acquisitions immediately impact the bottom line as some are long-term investments.
Q: Why is projected capital spend for coal operations higher in the second half of the year?
A: John Butler, President and CEO: The increase is likely due to timing of investments or one-time expenditures. Overall, we expect capital expenditures in our coal mining business to drop significantly over the next several years.
Q: Do you have more visibility on insurance recovery for the boiler outage?
A: John Butler, President and CEO: We have more visibility but are not prepared to make any statements about potential recovery amounts at this time.
Q: Will working capital normalize and generate cash later in the year?
A: John Butler, President and CEO: Working capital for us normalizes over time. It's not like a typical manufacturing company. Specific projects may temporarily affect working capital, but it balances out.
Q: Which segment offers higher ROIs, and is there a desire to invest more in one segment over others?
A: John Butler, President and CEO: Our highest returns come from unconsolidated coal mining operations and legacy natural gas assets. However, we are pleased with our diversified portfolio and continue to invest in all segments that meet our criteria for growth and profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
