Warrior Met Coal, Inc. (HCC) Bundle
Understanding Warrior Met Coal, Inc. (HCC) Revenue Streams
Understanding Warrior Met Coal, Inc.’s Revenue Streams
For the three months ended September 30, 2024, total revenues were $327.7 million, compared to $423.5 million for the same period in 2023, representing a decline of 22.6%.
Sales for the three months ended September 30, 2024 were $319.9 million, down from $416.9 million in the prior year. This decrease was primarily due to:
- A decline of $73.3 million attributed to a 17.6% decrease in steelmaking coal sales volume (0.4 million metric tons).
- A drop of $23.7 million due to a $14.02 per metric ton decrease in the average net selling price of steelmaking coal.
The average net selling price per metric ton of steelmaking coal decreased from $203.56 in Q3 2023 to $189.54 in Q3 2024.
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total revenue was $1,227.8 million, compared to $1,312.8 million for the same period in 2023, reflecting a decrease of 6.5%.
Year-over-year revenue growth rates are summarized below:
| Period | Revenue ($ millions) | Year-over-Year Growth Rate (%) |
|---|---|---|
| Q3 2023 | $423.5 | - |
| Q3 2024 | $327.7 | -22.6 |
| 9M 2023 | $1,312.8 | - |
| 9M 2024 | $1,227.8 | -6.5 |
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 30, 2024, sales from different geographic regions were as follows:
- Europe: 44%
- Asia: 41%
- South America: 15%
- United States: 1%
In Q3 2023, the geographic mix was:
- Asia: 45%
- Europe: 36%
- South America: 19%
Other revenues, which include income from natural gas operations and royalties, increased from $6.6 million in Q3 2023 to $7.8 million in Q3 2024.
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams include:
- A decrease in steelmaking coal sales volume by 0.4 million metric tons, correlating with a 17.6% decline in revenue.
- A decrease in the average net selling price per metric ton of steelmaking coal, which fell by $14.02.
For the nine months ended September 30, 2024, the average net selling price per metric ton was $218.79, down from $237.32 in 2023.
Overall, the performance reflects challenges in the global steel market and a selective approach to spot sales amid fluctuating market conditions.
A Deep Dive into Warrior Met Coal, Inc. (HCC) Profitability
A Deep Dive into Warrior Met Coal, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $88,346 thousand, resulting in a gross profit margin of 26.9%. In comparison, for the same period in 2023, the gross profit was $156,512 thousand, yielding a gross profit margin of 37.0%.
Operating Profit Margin: The operating profit for the three months ended September 30, 2024, was $39,116 thousand, leading to an operating profit margin of 11.9%. In the same quarter of 2023, the operating profit was $107,751 thousand, with an operating profit margin of 25.4%.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $41,766 thousand, which translates to a net profit margin of 12.7%. For the three months ended September 30, 2023, net income was $85,382 thousand, resulting in a net profit margin of 20.2%.
| Metric | 2024 Q3 | 2023 Q3 |
|---|---|---|
| Gross Profit ($ in thousands) | $88,346 | $156,512 |
| Gross Profit Margin (%) | 26.9% | 37.0% |
| Operating Profit ($ in thousands) | $39,116 | $107,751 |
| Operating Profit Margin (%) | 11.9% | 25.4% |
| Net Income ($ in thousands) | $41,766 | $85,382 |
| Net Profit Margin (%) | 12.7% | 20.2% |
Trends in Profitability: The nine months ended September 30, 2024, showed a net income of $249,467 thousand compared to $349,753 thousand for the same period in 2023. This represents a decrease in net profit margin from 26.6% to 20.3%.
Comparison with Industry Averages: The industry average net profit margin for coal mining companies is approximately 10-15%. The company's net profit margin of 12.7% for Q3 2024 is within this range, indicating competitive performance.
Operational Efficiency: The cost of sales for the three months ended September 30, 2024, was $231,598 thousand, which accounted for 70.7% of total revenues. This is an increase from 61.5% in Q3 2023. The cash cost of sales per metric ton for Q3 2024 was $136.10, up from $126.36 in Q3 2023.
| Metric | 2024 Q3 | 2023 Q3 |
|---|---|---|
| Cost of Sales ($ in thousands) | $231,598 | $260,376 |
| Cost of Sales (% of Total Revenues) | 70.7% | 61.5% |
| Cash Cost of Sales per Metric Ton | $136.10 | $126.36 |
Conclusion on Operational Efficiency: The increased cash cost of sales per metric ton reflects rising production costs, primarily driven by increased headcount and supply costs. This trend suggests a need for enhanced cost management strategies to maintain profitability in a challenging market environment.
Debt vs. Equity: How Warrior Met Coal, Inc. (HCC) Finances Its Growth
Debt vs. Equity: How Warrior Met Coal, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported total debt of $153.46 million, which consists solely of long-term debt. This includes $156.52 million in senior secured notes with a weighted average interest rate of 7.875% maturing in December 2028. There were no current debts reported, indicating that all obligations are due in the long term .
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.073 calculated from total liabilities of $493.62 million and total stockholders' equity of $2.09 billion as of September 30, 2024 .
Industry Comparison
The average debt-to-equity ratio for the coal industry typically ranges from 0.50 to 1.00. Therefore, the company's ratio is significantly lower than the industry average, suggesting a conservative approach to leverage .
Recent Debt Issuances and Refinancing Activity
On December 6, 2021, the company issued $350 million in senior secured notes due 2028. The proceeds were primarily used to redeem previous notes totaling $146.1 million, incurring a loss of $11.7 million due to early extinguishment .
Credit Ratings
The company maintains a credit rating that reflects a stable outlook, although specific ratings were not disclosed in the latest financial statements .
Balancing Debt Financing and Equity Funding
The company has historically favored equity funding, evidenced by retained earnings of $1.85 billion as of September 30, 2024, compared to its total debt. This indicates a strong reliance on internal cash flows and equity rather than high levels of borrowing .
| Metric | Amount |
|---|---|
| Total Debt | $153.46 million |
| Long-term Debt | $153.46 million |
| Debt-to-Equity Ratio | 0.073 |
| Senior Secured Notes | $156.52 million |
| Weighted Average Interest Rate | 7.875% |
| Retained Earnings | $1.85 billion |
This financial strategy highlights the company's commitment to maintaining a lower risk profile by minimizing debt, which is crucial for investors assessing the company's overall financial health and growth potential .
Assessing Warrior Met Coal, Inc. (HCC) Liquidity
Assessing Warrior Met Coal, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 4.05, indicating strong liquidity, as current assets significantly exceed current liabilities.
Quick Ratio: The quick ratio, which excludes inventory from current assets, is 3.82, suggesting that the company can easily meet its short-term obligations without relying on inventory sales.
Working Capital Trends
As of September 30, 2024, the total working capital is $577.5 million. This represents an increase of $52.6 million from December 31, 2023, driven primarily by increased accounts receivable due to higher sales volumes.
| Period | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) |
|---|---|---|---|
| September 30, 2024 | 2,352.8 | 1,775.3 | 577.5 |
| December 31, 2023 | 2,300.2 | 1,735.5 | 564.7 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities is $313.2 million, a decrease from $456.0 million in the same period of 2023. This decline is attributed to lower net income and changes in working capital.
Investing Cash Flow: The net cash used in investing activities for the nine months ended September 30, 2024, is $395.8 million, compared to $344.8 million in 2023, primarily due to capital expenditures for property, plant, and equipment.
Financing Cash Flow: For the nine months ended September 30, 2024, net cash used in financing activities is $65.0 million, significantly lower than $253.9 million in 2023, reflecting reduced debt repayments and dividend payments.
| Cash Flow Activity | 2024 ($ million) | 2023 ($ million) |
|---|---|---|
| Operating Activities | 313.2 | 456.0 |
| Investing Activities | (395.8) | (344.8) |
| Financing Activities | (65.0) | (253.9) |
Potential Liquidity Concerns or Strengths
The company's liquidity position is robust, with total liquidity of $746.4 million as of September 30, 2024, which includes cash and cash equivalents of $583.2 million and $113.5 million available under the ABL Facility. No loans were outstanding under the ABL Facility at this time, indicating a strong capacity to manage short-term obligations.
However, the decrease in operating cash flow and the increase in capital expenditures could suggest a potential strain on liquidity if these trends continue. Investors should monitor future production levels and market conditions closely.
Is Warrior Met Coal, Inc. (HCC) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze the following financial metrics: Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated as follows:
- Current Stock Price: $6.34
- Trailing Twelve Months Earnings Per Share (EPS): $4.78
- P/E Ratio: $6.34 / $4.78 = 1.33
Price-to-Book (P/B) Ratio
The P/B ratio is determined using the following values:
- Book Value Per Share: $27.86
- P/B Ratio: $6.34 / $27.86 = 0.23
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio:
- Enterprise Value (EV): $1.34 billion
- EBITDA for the trailing twelve months: $394.63 million
- EV/EBITDA Ratio: $1.34 billion / $394.63 million = 3.39
Stock Price Trends
Over the past 12 months, the stock price has shown the following trends:
- 12-Month High: $21.50
- 12-Month Low: $5.25
- Current Price: $6.34
- Percentage Change from 12-Month High: -70.5%
- Percentage Change from 12-Month Low: +20.8%
Dividend Yield and Payout Ratios
The dividend metrics are as follows:
- Dividend Per Share: $0.08 (annualized)
- Current Stock Price: $6.34
- Dividend Yield: $0.08 / $6.34 = 1.26%
- Payout Ratio: (Dividend Per Share / Earnings Per Share) = $0.08 / $4.78 = 1.67%
Analyst Consensus on Stock Valuation
The consensus among analysts is represented as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 1.33 |
| P/B Ratio | 0.23 |
| EV/EBITDA Ratio | 3.39 |
| 12-Month High | $21.50 |
| 12-Month Low | $5.25 |
| Current Stock Price | $6.34 |
| Dividend Yield | 1.26% |
| Payout Ratio | 1.67% |
Key Risks Facing Warrior Met Coal, Inc. (HCC)
Key Risks Facing Warrior Met Coal, Inc.
Internal and External Risks:
- Competition within the coal industry remains fierce, with numerous players vying for market share.
- Regulatory changes, particularly related to environmental policies, could impose additional costs or operational restrictions.
- Market conditions, including fluctuating demand for steelmaking coal, directly impact revenue.
Operational Risks:
- Production levels have decreased, with 1.7 million metric tons produced in Q3 2024, down from 1.8 million metric tons in Q3 2023, representing a 3.8% decrease.
- Operational capacity has been reduced, impacting sales volumes and overall profitability.
Financial Risks:
- Net income for the nine months ended September 30, 2024, was $249.5 million, down from $349.8 million in the same period of 2023.
- Sales decreased by $80 million or 6.2% from $1.288 billion in 2023 to $1.208 billion in 2024.
Strategic Risks:
- Geographic customer mix for Q3 2024 was 44% in Europe, 41% in Asia, and 15% in South America, indicating reliance on international markets.
- Average net selling price per metric ton dropped from $203.56 in Q3 2023 to $189.54 in Q3 2024, a decrease of $14.02.
Mitigation Strategies:
- Management has indicated a selective approach to spot sales to optimize revenue based on market conditions.
- Investment in infrastructure, with capital expenditures for Blue Creek development reaching $246.4 million in 2024, compared to $191.3 million in 2023.
| Financial Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Income | $41.8 million | $85.4 million | $249.5 million | $349.8 million |
| Sales | $319.9 million | $416.9 million | $1,208.4 million | $1,288.4 million |
| Average Selling Price per Metric Ton | $189.54 | $203.56 | $218.79 | $237.32 |
| Metric Tons Produced | 1.7 million | 1.8 million | 5.6 million | 5.1 million |
| Cash Cost of Sales per Metric Ton | $136.10 | $126.36 | $140.07 | $132.49 |
Future Growth Prospects for Warrior Met Coal, Inc. (HCC)
Future Growth Prospects for Warrior Met Coal, Inc.
Analysis of Key Growth Drivers
The primary growth drivers for the company in 2024 include:
- Product Innovations: The transition of Mine No. 4 coal from Mid Volatility to High Volatility A quality is anticipated to enhance market pricing dynamics.
- Market Expansions: Significant customer bases in Europe (44%), Asia (41%), and South America (15%) provide a diversified market reach.
- Acquisitions: Potential future acquisitions may be aimed at expanding operational capacity and resource base, particularly with the undeveloped Blue Creek mine having 67.6 million metric tons of recoverable reserves.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections estimate a recovery in sales as market conditions improve. For the nine months ended September 30, 2024, total revenues were $1,227.8 million, a decrease of 6.5% from $1,312.8 million in the previous year. Earnings estimates forecast net income of $249.5 million for the same period, down from $349.8 million in 2023.
Strategic Initiatives or Partnerships
Strategic initiatives include:
- Investment in Infrastructure: Ongoing improvements to rail transportation and terminal operations to enhance logistics and reduce costs.
- Partnerships with Steel Manufacturers: Collaborations aimed at securing long-term contracts, particularly in Asia and Europe, to stabilize revenue streams.
Competitive Advantages
The company benefits from several competitive advantages:
- Low-cost Production: As a large-scale, low-cost producer, the company operates efficiently, which is crucial in a volatile pricing environment.
- High-quality Coal Reserves: The quality of the coal produced, characterized by low sulfur and low-to-medium ash content, positions the company favorably against competitors.
- Strong Liquidity Position: Total liquidity as of September 30, 2024, was $746.4 million, providing ample resources for investment and operational flexibility.
Financial Overview Table
| Metric | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Total Revenues | $1,227.8 million | $1,312.8 million |
| Net Income | $249.5 million | $349.8 million |
| Average Net Selling Price per Metric Ton | $218.79 | $237.32 |
| Metric Tons Sold | 5,523 thousand | 5,429 thousand |
| Cash Cost of Sales per Metric Ton | $140.07 | $132.49 |
| Total Liquidity | $746.4 million | N/A |
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Article updated on 8 Nov 2024
Resources:
- Warrior Met Coal, Inc. (HCC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Warrior Met Coal, Inc. (HCC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Warrior Met Coal, Inc. (HCC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.