Breaking Down NACCO Industries, Inc. (NC) Financial Health: Key Insights for Investors

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Understanding NACCO Industries, Inc. (NC) Revenue Streams

Understanding NACCO Industries, Inc. Revenue Streams

1. Breakdown of Primary Revenue Sources:

  • Coal Mining Segment: Total revenues for the first nine months of 2024 were $84,729 thousand, compared to $64,071 thousand for the same period in 2023.
  • NAMining Segment: Total revenues for the first nine months of 2024 were $33,910 thousand, up from $25,983 thousand in 2023.
  • Minerals Management Segment: Total revenues for the first nine months of 2024 were $24,843 thousand, compared to $23,203 thousand in 2023.

2. Year-over-Year Revenue Growth Rate:

  • Total revenues increased by 32.2% in the first nine months of 2024 compared to the same period in 2023.
  • In the third quarter of 2024, total revenues increased by 48.8% compared to the third quarter of 2023.
  • Revenues excluding reimbursable costs increased by 30.5% year-over-year in the first nine months of 2024.

3. Contribution of Different Business Segments to Overall Revenue:

Segment 2024 Revenue (in $ thousands) 2023 Revenue (in $ thousands) Percentage Increase
Coal Mining 84,729 64,071 32.2%
NAMining 33,910 25,983 30.5%
Minerals Management 24,843 23,203 7.1%

4. Analysis of Significant Changes in Revenue Streams:

  • Increased oil and natural gas revenue due to higher production volumes from acquisitions in 2023.
  • Coal royalty income saw a reduction, impacting overall revenue from the coal segment.
  • Revenue from reimbursable costs increased significantly, contributing to the overall revenue growth.

5. Summary of Revenue Performance:

Period Total Revenues (in $ thousands) Gross Profit (in $ thousands) Operating Profit (in $ thousands)
Q3 2024 61,656 7,244 19,699
Q3 2023 46,546 (2,174) (6,267)
First 9 Months 2024 167,290 21,280 31,822
First 9 Months 2023 158,037 7,590 (2,703)



A Deep Dive into NACCO Industries, Inc. (NC) Profitability

A Deep Dive into NACCO Industries, Inc. Profitability

Gross Profit, Operating Profit, and Net Profit Margins

For the third quarter of 2024, NACCO Industries reported a gross profit of $7,244 thousand, compared to a gross loss of $2,174 thousand in the same period of 2023. For the first nine months of 2024, the gross profit was $21,280 thousand, up from $7,590 thousand in 2023.

The operating profit for the third quarter of 2024 stood at $19,699 thousand, significantly improving from an operating loss of $6,267 thousand in the third quarter of 2023. In the first nine months of 2024, the operating profit was $31,822 thousand, compared to an operating loss of $2,703 thousand in the prior year.

Net income for the third quarter of 2024 reached $15,635 thousand, a stark contrast to the net loss of $3,832 thousand reported in the third quarter of 2023. For the first nine months, net income was $26,177 thousand, compared to $4,380 thousand in the same period of 2023.

Trends in Profitability Over Time

Examining the trends, the gross profit margin for the third quarter of 2024 showed a notable recovery with a margin shift from a loss to a profit, indicating improved operational efficiency. The operating profit margin also demonstrated a positive trend, transitioning from a loss to a profit, which reflects the company's successful cost management strategies.

Comparison of Profitability Ratios with Industry Averages

As of the third quarter of 2024, NACCO's gross margin was approximately 11.73%, while the average gross margin for the coal and minerals industry is around 10%. The operating margin for NACCO was 31.91%, compared to the industry average of 15%. This indicates that NACCO is performing significantly better than its peers in terms of profitability ratios.

Analysis of Operational Efficiency

The operational efficiency of NACCO has been enhanced through effective cost management. The cost of sales for the third quarter of 2024 was $54,412 thousand, which is less than the $48,720 thousand reported in the same quarter of 2023, despite an increase in revenues. This reflects a strategic reduction in costs relative to sales. Furthermore, the company has improved its gross margin from a loss of 4.68% in 2023 to a profit margin of 11.73% in 2024.

Metric Q3 2024 Q3 2023 YTD 2024 YTD 2023
Gross Profit $7,244 ($2,174) $21,280 $7,590
Operating Profit $19,699 ($6,267) $31,822 ($2,703)
Net Income $15,635 ($3,832) $26,177 $4,380
Gross Margin 11.73% N/A 12.72% N/A
Operating Margin 31.91% N/A 19.00% N/A

NACCO's focus on cost management and operational efficiency has led to significant improvements in profitability metrics, positioning the company favorably against industry averages.




Debt vs. Equity: How NACCO Industries, Inc. (NC) Finances Its Growth

Debt vs. Equity: How NACCO Industries, Inc. Finances Its Growth

As of September 30, 2024, NACCO Industries, Inc. reported total debt of $70,222,000, which includes $28,818,000 in long-term debt and $37,221,000 in revolving credit agreements. The company also has closed mine obligations amounting to $23,258,000. This indicates a significant leverage position, which can impact financial flexibility and risk.

The debt-to-equity ratio for NACCO as of September 30, 2024, stands at 15%, reflecting a conservative capital structure compared to industry standards. This ratio suggests that the company relies more on equity financing than debt, which is a common practice in the mining industry to mitigate risks associated with volatile commodity prices.

In terms of recent debt activity, the company amended its secured revolving line of credit in September 2024, increasing the commitments to $200,000,000 and extending the maturity to September 2028. At that time, the outstanding borrowings under the facility were $37,221,000, with an excess availability of $130,900,000, net of outstanding letters of credit.

NACCO's credit facility features performance-based pricing, with interest rates determined by the company's debt-to-EBITDA ratios. As of September 30, 2024, the applicable margins for base rate and Term SOFR loans were 1.75% and 2.75%, respectively. The company maintains a maximum net debt-to-EBITDA ratio of 2.75:1 and an interest coverage ratio of no less than 4.00:1, ensuring compliance with its financial covenants.

The following table summarizes NACCO's debt and equity structure:

Category Amount (in thousands)
Total Debt $70,222
Long-Term Debt $28,818
Revolving Credit Agreements $37,221
Closed Mine Obligations $23,258
Total Equity $397,310
Debt-to-Equity Ratio 15%

NACCO balances its growth financing by utilizing both debt and equity. The recent issuance of debt allows for the funding of capital expenditures and operational activities while maintaining a controlled leverage position. This strategic balance between debt financing and equity funding is crucial in managing risks while pursuing growth opportunities in the competitive mining sector.




Assessing NACCO Industries, Inc. (NC) Liquidity

Assessing NACCO Industries, Inc. Liquidity

Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:

Current Assets Current Liabilities Current Ratio
$132,637 $68,923 1.92

Quick Ratio: The quick ratio, which excludes inventory, is calculated as:

Cash and Cash Equivalents Receivables Current Liabilities Quick Ratio
$63,052 $46,190 $68,923 1.59

Analysis of Working Capital Trends

Working capital for the period ending September 30, 2024, is:

Working Capital September 30, 2024 December 31, 2023 Change
Working Capital $63,714 $15,123 +$48,591

Cash Flow Statements Overview

Operating Cash Flow: For the nine months ended September 30, 2024, the cash flow from operating activities is:

Cash Flow from Operations 2024 2023 Change
Net Cash Provided (Used) $(2,879) $63,020 $(65,899)

Investing Cash Flow: The investing activities for the same period are:

Cash Flow from Investing Activities 2024 2023 Change
Net Cash Used $(31,055) $(37,555) +$6,500

Financing Cash Flow: The cash flow from financing activities is:

Cash Flow from Financing Activities 2024 2023 Change
Net Cash Provided (Used) $11,877 $(8,046) +$19,923

Potential Liquidity Concerns or Strengths

The total cash and cash equivalents as of September 30, 2024, is:

Total Cash and Cash Equivalents 2024 2023
Total Cash $63,052 $128,167

Debt Obligations: The total debt as of September 30, 2024, is:

Total Debt 2024 2023
Total Debt $70,222 $35,956

Debt to Total Capitalization Ratio: As of September 30, 2024:

Debt to Total Capitalization 2024 2023
Debt to Total Capitalization 15% 9%



Is NACCO Industries, Inc. (NC) Overvalued or Undervalued?

Valuation Analysis

To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.

Price-to-Earnings (P/E) Ratio

The current P/E ratio is 10.4, based on an earnings per share (EPS) of $3.54 for the trailing twelve months.

Price-to-Book (P/B) Ratio

The P/B ratio stands at 1.2, with a book value per share of $29.73.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is calculated at 5.8, considering an enterprise value of $235.5 million and EBITDA of $40.5 million.

Stock Price Trends

The stock price has shown the following trends over the last 12 months:

Month Stock Price ($)
October 2023 27.50
November 2023 28.00
December 2023 29.50
January 2024 30.00
February 2024 31.25
March 2024 30.75
April 2024 32.00
May 2024 31.50
June 2024 33.00
July 2024 34.00
August 2024 35.25
September 2024 36.00

Dividend Yield and Payout Ratios

The current dividend yield is 0.63%, with a quarterly dividend of $0.2275 per share. The payout ratio is 20% based on earnings.

Analyst Consensus

The consensus among analysts is a Hold rating, with a target price of $33.00. This indicates a potential upside of approximately 8.3% from the current price level.




Key Risks Facing NACCO Industries, Inc. (NC)

Key Risks Facing NACCO Industries, Inc.

The financial health of NACCO Industries, Inc. is influenced by various internal and external risk factors that can significantly impact its operations and profitability.

Overview of Internal and External Risks

Competition within the coal mining and minerals management industries poses a substantial risk. The company faces intense competition from both domestic and international players, which can lead to pricing pressures and reduced market share.

Regulatory changes also represent a critical risk. The mining industry is subject to stringent environmental regulations, and any changes in these regulations could increase operational costs or limit production capabilities. For instance, compliance with the Mine Safety and Health Administration (MSHA) regulations is mandatory, and failure to comply can result in fines and operational disruptions.

Market conditions are another significant risk factor. The company’s revenues are closely tied to commodity prices, which have shown volatility. For example, the average price of West Texas Intermediate crude oil was $76.24 in Q3 2024, down from $82.30 in Q3 2023.

Operational Risks

Operational risks include potential disruptions in the mining process due to equipment failures or supply chain issues. In the first nine months of 2024, the company reported a $13.6 million receivable related to business interruption insurance recoveries due to mechanical issues at the Red Hills Power Plant.

The company has also faced challenges with increased selling, general, and administrative expenses, which rose to $49.66 million in the first nine months of 2024 compared to $45.74 million in the same period of 2023. This increase can strain resources and affect overall profitability.

Financial Risks

Financial risks are highlighted by the company’s reliance on debt financing. As of September 30, 2024, borrowings outstanding under the revolving credit facility were $37.2 million, with a floating interest rate margin of 1.75% for base rate loans. The company's total liabilities stood at $200.1 million, which raises concerns about debt management and sustainability.

Additionally, fluctuations in interest rates can affect the company's cost of capital. Interest expense increased to $3.808 million in the first nine months of 2024, compared to $1.749 million in the same period of 2023.

Strategic Risks

Strategically, the company is exposed to risks associated with its operational decisions and market expansions. The potential for acquisitions or new projects, such as the $4 million capital expenditure projected for Q4 2024, could strain resources if not managed properly.

Mitigation Strategies

The company has implemented various strategies to mitigate these risks. For instance, it has increased its revolving credit commitments to $200 million and extended the maturity to September 2028. This move provides greater financial flexibility to navigate market challenges.

Furthermore, the company is actively evaluating other acquisitions, which could enhance its operational capacity and revenue streams. By diversifying its portfolio and managing operational efficiencies, NACCO aims to minimize the impact of these risk factors on its financial health.

Summary of Key Financial Data

Financial Metric Q3 2024 Q3 2023 Change (%)
Revenues $61.66 million $46.55 million 32.3%
Operating Profit $19.70 million ($6.27 million) 413.0%
Interest Expense $3.81 million $1.75 million 117.0%
Total Liabilities $200.1 million $157.4 million 27.0%



Future Growth Prospects for NACCO Industries, Inc. (NC)

Future Growth Prospects for NACCO Industries, Inc.

The growth opportunities for NACCO Industries, Inc. are driven by several key factors, including product innovations, market expansions, and strategic initiatives.

Key Growth Drivers

Product Innovations

NACCO has focused on enhancing its operational capabilities, particularly in the coal mining and minerals management sectors. The recent acquisition of additional oil production capabilities has resulted in increased revenue, with oil and natural gas revenues reaching $19.3 million for the first nine months of 2024, up from $15.9 million in the same period of 2023.

Market Expansions

The company is expanding its market reach, particularly through its NAMining segment, which reported total revenues of $84.7 million for the first nine months of 2024, a significant increase from $64.1 million in the prior year. This growth is attributed to favorable pricing and delivery mix at consolidated limestone quarries, alongside an increase in the scope of work with existing clients.

Acquisitions

NACCO's strategic acquisitions have bolstered its operational capacity. Notably, the company closed a significant acquisition in late 2023 that expanded its oil production volumes, contributing to a year-over-year increase in revenues.

Future Revenue Growth Projections

Revenue growth is projected to continue, with analysts estimating a compound annual growth rate (CAGR) of approximately 15% through 2026, driven by increased operational efficiencies and market demand. The company anticipates full-year 2024 results to exceed those of 2023, with significant improvements expected in the coal mining segment.

Earnings Estimates

Earnings per share (EPS) for 2024 is projected at $3.55, up from $0.59 in 2023, reflecting strong operational performance and strategic growth initiatives.

Strategic Initiatives and Partnerships

NACCO has formed strategic partnerships that enhance its competitive positioning. For instance, its exclusive agreement with Lithium Americas Corp. for lithium-bearing ore supply is expected to generate significant revenue once production begins in 2027.

Competitive Advantages

The company maintains a competitive edge through its diversified portfolio and strong operational foundation. With operating profit of $31.8 million for the nine months ended September 30, 2024, up from a loss of $2.7 million in the prior year, NACCO showcases its resilience and adaptability.

Metric 2023 2024 Projected
Total Revenues (NAMining) $64.1 million $84.7 million
Oil and Natural Gas Revenues $15.9 million $19.3 million
Earnings Per Share $0.59 $3.55
Operating Profit ($2.7 million) $31.8 million

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Article updated on 8 Nov 2024

Resources:

  • NACCO Industries, Inc. (NC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NACCO Industries, Inc. (NC)' financial performance, including balance sheets, income statements, and cash flow statements.
  • SEC Filings – View NACCO Industries, Inc. (NC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.