Alliance Resource Partners, L.P. (ARLP) Bundle
Understanding Alliance Resource Partners, L.P. (ARLP) Revenue Streams
Understanding Alliance Resource Partners, L.P. (ARLP)’s Revenue Streams
Total revenues for the 2024 Quarter amounted to $613.6 million, representing a decrease of 3.6% from $636.5 million in the 2023 Quarter. This decline was primarily due to reduced coal sales prices, which fell by 2.1% in part because of lower export pricing in Appalachia, alongside decreased transportation revenues.
For the 2024 Period (first nine months), total revenues decreased 4.3% to $1.86 billion from $1.94 billion in the same timeframe in 2023. The decrease was attributed to lower coal sales and transportation revenues, which were partially offset by higher oil and gas royalties.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the 2024 Quarter showed a 3.4% increase compared to the Sequential Quarter, which recorded revenues of $593.4 million. This increase in revenue was driven by a 6.7% rise in coal sales volumes, with 8.4 million tons sold compared to 7.9 million tons in the previous quarter.
Contribution of Different Business Segments to Overall Revenue
| Segment | 2024 Q3 Revenue (in millions) | 2023 Q3 Revenue (in millions) | Change (%) |
|---|---|---|---|
| Coal Sales | $532.6 | $549.1 | -3.0% |
| Oil & Gas Royalties | $34.4 | $34.1 | +0.9% |
| Transportation Revenues | $24.6 | $35.0 | -29.5% |
| Other Revenues | $21.9 | $18.3 | +19.7% |
| Total Revenues | $613.6 | $636.5 | -3.6% |
Analysis of Significant Changes in Revenue Streams
The coal sales segment experienced a decline due to reduced average sales prices per ton. The average coal sales price per ton sold decreased to $63.57 in the 2024 Quarter from $64.94 in the previous year, reflecting a 2.1% decline. This was driven by lower export price realizations from the Mettiki and MC Mining operations.
Conversely, oil and gas royalties saw an increase in volumes, with a total of 864 MBOE sold in the 2024 Quarter, up 11.9% year-over-year. However, the average sales price per BOE dropped to $39.87, down 9.8% from the previous year.
Transportation revenues fell significantly by 29.5% compared to the previous year, attributed to reduced transportation volumes and pricing.
The revenue contribution from the coal royalties segment also showed growth, with royalty tons sold increasing to 5.109 million tons, up 2.3% from 4.993 million tons in the 2023 Quarter.
A Deep Dive into Alliance Resource Partners, L.P. (ARLP) Profitability
A Deep Dive into Alliance Resource Partners, L.P. (ARLP) Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was calculated as follows:
| Period | Total Revenues ($ million) | Cost of Goods Sold ($ million) | Gross Profit ($ million) | Gross Profit Margin (%) |
|---|---|---|---|---|
| Q3 2024 | 613.6 | 384.8 | 228.8 | 37.3 |
| Q3 2023 | 636.5 | 339.1 | 297.4 | 46.7 |
The gross profit margin has seen a significant decline from 46.7% in Q3 2023 to 37.3% in Q3 2024, indicating increased cost pressures or reduced pricing power in the market.
Operating Profit Margin: The operating profit margin for Q3 2024 was calculated as:
| Period | Operating Income ($ million) | Total Revenues ($ million) | Operating Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | 101.1 | 613.6 | 16.5 |
| Q3 2023 | 165.4 | 636.5 | 25.9 |
There is a notable decrease in the operating profit margin from 25.9% in Q3 2023 to 16.5% in Q3 2024, reflecting higher operating costs and lower revenues.
Net Profit Margin: The net profit margin for the same periods is shown below:
| Period | Net Income ($ million) | Total Revenues ($ million) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | 86.3 | 613.6 | 14.1 |
| Q3 2023 | 153.7 | 636.5 | 24.1 |
The net profit margin has decreased significantly from 24.1% in Q3 2023 to 14.1% in Q3 2024, further highlighting the challenges faced in maintaining profitability.
Trends in Profitability Over Time
Over the past year, the profitability metrics have shown a downward trend. The decline in gross, operating, and net profit margins indicates that the company is facing increasing cost pressures and possibly declining sales prices.
Comparison of Profitability Ratios with Industry Averages
To provide context, the average profitability margins within the coal industry are approximately:
- Gross Profit Margin: 40%
- Operating Profit Margin: 18%
- Net Profit Margin: 15%
Comparatively, the company’s margins in Q3 2024 indicate performance below industry averages, particularly in operating and net profit margins.
Analysis of Operational Efficiency
Cost Management: The total operating expenses for Q3 2024 were $512.5 million, which was an increase from $471.1 million in Q3 2023. This increase in operating expenses has contributed to the decline in profitability margins.
Gross Margin Trends: The gross margin trend reflects the impact of increased costs and lower sales prices per ton. The coal sales price per ton decreased to $63.57 in Q3 2024 from $64.94 in Q3 2023.
| Period | Coal Sales Price per Ton ($) | Segment Adjusted EBITDA ($ million) | Segment Adjusted EBITDA Expense per Ton ($) |
|---|---|---|---|
| Q3 2024 | 63.57 | 149.3 | 46.11 |
| Q3 2023 | 64.94 | 204.3 | 41.19 |
The segment adjusted EBITDA expense per ton has increased from $41.19 in Q3 2023 to $46.11 in Q3 2024, indicating a decrease in operational efficiency.
Debt vs. Equity: How Alliance Resource Partners, L.P. (ARLP) Finances Its Growth
Debt vs. Equity: How Alliance Resource Partners, L.P. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total debt and finance leases outstanding for the company were $497.4 million, which included $400 million in recently issued Senior Notes due 2029.
Debt-to-Equity Ratio
The company's total leverage ratio was 0.64 times and the net leverage ratio was 0.39 times based on trailing twelve months Adjusted EBITDA as of September 30, 2024.
Comparison to Industry Standards
The average debt-to-equity ratio for companies in the coal industry typically ranges from 0.5 to 1.5. The company's ratio falls within this range, indicating a balanced approach to financing.
Recent Debt Issuances and Credit Ratings
In 2024, the company issued $400 million in Senior Notes due 2029. The company's credit ratings remain stable, reflecting its solid financial position and ability to meet obligations.
Balancing Debt Financing and Equity Funding
The company maintains a balance between debt and equity funding to finance its growth strategies. As of the latest reports, total liquidity stood at $657.7 million, comprising $195.4 million in cash and cash equivalents and $462.3 million available under revolving credit and accounts receivable securitization facilities.
| Category | Amount |
|---|---|
| Total Debt | $497.4 million |
| Senior Notes Issued | $400 million |
| Total Liquidity | $657.7 million |
| Cash and Cash Equivalents | $195.4 million |
| Available Borrowings | $462.3 million |
| Total Leverage Ratio | 0.64 times |
| Net Leverage Ratio | 0.39 times |
Assessing Alliance Resource Partners, L.P. (ARLP) Liquidity
Assessing Alliance Resource Partners, L.P. (ARLP) Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio for Alliance Resource Partners, L.P. is calculated as follows:
- Current Assets: $626.5 million
- Current Liabilities: $297.3 million
- Current Ratio: 2.11
The quick ratio is determined by subtracting inventories from current assets:
- Quick Assets: $626.5 million - $177.5 million = $449 million
- Quick Ratio: 1.51
Analysis of Working Capital Trends
Working capital as of September 30, 2024, is as follows:
- Working Capital: $626.5 million - $297.3 million = $329.2 million
This reflects an increase from prior periods, indicating improved liquidity and operational efficiency.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, indicates the following:
| Cash Flow Type | Q3 2024 (in $ millions) | Q3 2023 (in $ millions) |
|---|---|---|
| Operating Activities | $634.7 | $730.3 |
| Investing Activities | ($337.4) | ($439.4) |
| Financing Activities | ($161.7) | ($389.7) |
| Net Change in Cash | $135.6 | ($98.8) |
Potential Liquidity Concerns or Strengths
Liquidity strength is evidenced by a total liquidity of $657.7 million as of September 30, 2024, comprising:
- Cash and Cash Equivalents: $195.4 million
- Available Borrowings: $462.3 million
With total debt of $497.4 million, the leverage ratios are:
- Total Leverage Ratio: 0.64 times
- Net Leverage Ratio: 0.39 times
These figures indicate a solid liquidity position with manageable debt levels, contributing positively to overall financial health.
Is Alliance Resource Partners, L.P. (ARLP) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is critical in determining whether it is overvalued or undervalued. This section examines key financial metrics and stock performance for Alliance Resource Partners, L.P. (ARLP) as of 2024.
Price-to-Earnings (P/E) Ratio
As of the latest financial data, the P/E ratio for ARLP is 9.7, indicating the price investors are willing to pay per dollar of earnings.
Price-to-Book (P/B) Ratio
The current P/B ratio for ARLP stands at 1.3, reflecting how the market values the company relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
ARLP's EV/EBITDA ratio is 5.9, providing insight into the company's valuation relative to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, ARLP's stock price has displayed the following trends:
- 12 months ago: $9.20
- Current price: $12.80
- Percentage increase: 39.1%
Dividend Yield and Payout Ratios
ARLP has declared a quarterly cash distribution of $0.70 per unit, which annualizes to $2.80 per unit. The dividend yield is approximately 21.9%.
The payout ratio is calculated at 26.5%, indicating the proportion of earnings paid out as dividends.
Analyst Consensus on Stock Valuation
Analyst consensus for ARLP stock is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 9.7 |
| P/B Ratio | 1.3 |
| EV/EBITDA Ratio | 5.9 |
| Current Stock Price | $12.80 |
| Dividend per Unit | $2.80 |
| Dividend Yield | 21.9% |
| Payout Ratio | 26.5% |
Key Risks Facing Alliance Resource Partners, L.P. (ARLP)
Key Risks Facing Alliance Resource Partners, L.P.
Alliance Resource Partners, L.P. faces a variety of internal and external risks that could impact its financial health and operational performance.
Industry Competition
The coal industry is characterized by intense competition. In the third quarter of 2024, total coal sales volumes were reported at 8.379 million tons, slightly down from 8.456 million tons in the same quarter of 2023, indicating competitive pressures in maintaining sales volumes.
Regulatory Changes
Changes in environmental regulations pose a significant risk. The company has expressed concerns regarding federal regulations impacting grid reliability, which could lead to the premature retirement of essential baseload power sources. This could affect demand for coal, especially as over 40% of previously announced baseload power plant retirement dates have been deferred nationwide.
Market Conditions
Market conditions are volatile, evidenced by a 3.6% decrease in total revenues for the third quarter of 2024, totaling $613.6 million, down from $636.5 million in the same quarter of 2023. Lower coal sales prices, particularly in Appalachia where prices decreased by 5.8%, are contributing factors.
Operational Risks
Operational challenges include increased costs and reduced production efficiencies. Segment Adjusted EBITDA Expense per ton sold increased by 11.9% year-over-year to $46.11 during the third quarter of 2024, largely due to challenging mining conditions. The company also noted a 19.3% increase in EBITDA Expense per ton in Appalachia, reflecting increased subsidence-related expenses.
Financial Risks
As of September 30, 2024, total debt and finance leases outstanding were $497.4 million, including $400 million in Senior Notes due in 2029. The total leverage ratio stood at 0.64 times, and the net leverage ratio was 0.39 times debt to trailing twelve months Adjusted EBITDA.
Strategic Risks
The strategic shift to diversify into oil and gas royalties presents both opportunities and risks. In the third quarter of 2024, oil & gas royalty volumes increased to 864 MBOE, a 11.9% year-over-year increase. However, segment adjusted EBITDA for oil & gas royalties decreased by 8.5% compared to the same quarter of the previous year, attributed to reduced average realized sales prices.
Mitigation Strategies
The company has implemented various strategies to mitigate risks, including proactive production adjustments to align with shipping commitments. In the third quarter, ARLP took steps to reduce production in response to high stockpile levels, resulting in a decrease in coal inventory levels by over 0.5 million tons.
| Risk Factor | Current Status | Impact |
|---|---|---|
| Industry Competition | Sales volume: 8.379 million tons (Q3 2024) | Pressure on pricing and market share |
| Regulatory Changes | 40% of baseload plant retirements deferred | Potential decrease in coal demand |
| Market Conditions | Total revenues: $613.6 million (Q3 2024) | Volatility in revenues and pricing |
| Operational Risks | Adjusted EBITDA Expense per ton: $46.11 | Increased costs impacting profitability |
| Financial Risks | Total debt: $497.4 million | High leverage ratios affecting financial flexibility |
| Strategic Risks | Oil & gas royalties: 864 MBOE | Fluctuations in royalty revenues |
Overall, while the company has strategies in place to mitigate risks, the interplay of these factors will require ongoing management and adaptation to maintain financial health and operational efficiency.
Future Growth Prospects for Alliance Resource Partners, L.P. (ARLP)
Future Growth Prospects for Alliance Resource Partners, L.P.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The company is focusing on improving operational efficiencies and reducing costs through technology enhancements in coal mining operations.
- Market Expansions: The company plans to increase its footprint in the oil and gas sector, particularly in the Permian Basin, where significant drilling activities are underway.
- Acquisitions: In 2024, the company completed $10.5 million in oil and gas mineral interest acquisitions, which is expected to bolster future revenues.
Future Revenue Growth Projections and Earnings Estimates
The company reported total revenues of $613.6 million in the 2024 Quarter, a decrease of 3.6% compared to $636.5 million in the 2023 Quarter. However, revenues increased by 3.4% compared to the Sequential Quarter of $593.4 million.
For the full year 2024, the total revenue is projected to be $1.86 billion, down from $1.94 billion in 2023. Net income for the 2024 Period was $344.5 million, or $2.64 per basic and diluted limited partner unit, compared to $514.7 million, or $3.93 per unit in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is expanding its committed and priced sales tons for 2025 by 5.9 million tons to a total of 22.5 million tons. This includes active discussions with domestic customers to secure additional commitments, which would enhance future revenue stability.
Competitive Advantages That Position the Company for Growth
Competitive advantages include:
- Diverse Revenue Streams: The company generates income from both coal operations and oil & gas royalties, providing a buffer against volatility in any single segment.
- Strong Market Position: As the largest coal producer in the eastern United States, the company has a significant market share, which allows it to negotiate better terms with clients.
- Cost Management: The company reported a Segment Adjusted EBITDA Expense per ton sold of $46.11 in the 2024 Quarter, reflecting an increase of 11.9% year-over-year due to higher operational costs, but proactive measures are being taken to align production with shipments.
| Metric | 2024 Quarter | 2023 Quarter | Change (%) |
|---|---|---|---|
| Total Revenues | $613.6 million | $636.5 million | -3.6% |
| Net Income | $86.3 million | $153.7 million | -43.6% |
| EBITDA | $170.7 million | $227.6 million | -25.0% |
| Coal Sales Tons | 8.4 million | 7.9 million | +6.7% |
| Oil & Gas Royalties (BOE) | 864 MBOE | 772 MBOE | +11.9% |
As of September 30, 2024, the company had total debt and finance leases outstanding of $497.4 million, with total liquidity of $657.7 million, including $195.4 million in cash and cash equivalents.
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Article updated on 8 Nov 2024
Resources:
- Alliance Resource Partners, L.P. (ARLP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Alliance Resource Partners, L.P. (ARLP)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Alliance Resource Partners, L.P. (ARLP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.