Warrior Met Coal, Inc. (NYSE: HCC) is a U.S.-based, environmentally and socially minded supplier to the global steel industry. The company is dedicated entirely to mining non-thermal metallurgical ("met") steelmaking coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia. Warrior Met Coal 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.

Financials

The company reported strong financial results for the first quarter of 2024, with net income of $137 million, or $2.62 per diluted share, compared to net income of $182 million, or $3.51 per diluted share, in the same period of 2023. Total revenues for the quarter were $503.5 million, compared to $509.7 million in the prior year quarter. The decrease in revenues was primarily driven by a 9% decline in the average net selling price, partially offset by a 9% increase in sales volumes.

Warrior Met Coal's annual net income for 2023 was $478.6 million, with annual revenues of $1.68 billion. The company generated annual operating cash flow of $701.1 million and annual free cash flow of $209.4 million.

During the first quarter of 2024, the company's sales volumes increased 9% year-over-year to 1.9 million metric tons, driven by higher production levels at both of its operating mines as a result of the return of workers following the conclusion of a labor strike in the second quarter of 2023. The company's geographic customer mix in the quarter was 44% in Europe, 38% in Asia, and 18% in South America.

Warrior Met Coal's cash cost of sales increased to $284.2 million, or $147.16 per metric ton, in the first quarter of 2024, compared to $231.6 million, or $131.04 per metric ton, in the same period of 2023. The increase was primarily due to higher royalty costs, labor-related costs, and temporary increases in rail transportation and repairs and maintenance expenses.

The company's Adjusted EBITDA for the first quarter of 2024 was $200.2 million, compared to $259.4 million in the prior year quarter. The decrease was driven by the lower average net selling price and higher cash costs, partially offset by the increase in sales volumes.

Liquidity

Warrior Met Coal's balance sheet remains strong, with total liquidity of $801.3 million as of March 31, 2024, consisting of $693.9 million in cash and cash equivalents and $107.4 million available under its asset-based revolving credit facility. The company's debt levels are low, with $153.2 million in long-term debt outstanding as of the end of the first quarter.

Outlook

Looking ahead, the company expects demand from its key markets in India and China to remain softer in the second quarter of 2024 due to various macroeconomic factors. However, the company's contracted volumes in its traditional markets are expected to remain strong. Warrior Met Coal is also focused on the disciplined development of its world-class Blue Creek reserves, which it expects will enhance its already advantageous position on the global cost curve and cement its position as a leading pure-play steelmaking coal producer.

Recent Developments

The company has made significant progress on the Blue Creek project, with the first development tons from continuous miner units expected in the third quarter of 2024 and the longwall scheduled to start up in the second quarter of 2026. Warrior Met Coal plans to spend approximately $325 million to $375 million on the continued development of Blue Creek in 2024.

Conclusion

Overall, Warrior Met Coal's strong operational performance, healthy financial position, and strategic growth initiatives position the company well to capitalize on the expected long-term growth in global demand for high-quality met coal. The company's focus on disciplined capital allocation and shareholder returns, including its regular quarterly dividend and special dividends, further enhance its appeal as an investment opportunity in the met coal space.