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Warrior Met Coal, Inc. achieved a major milestone in Q1 2026 by completing the $1 billion Blue Creek mine project ahead of schedule and on budget. This development drove record production of 3.5 million tons and sales of 3.0 million tons, a 55% and 38% increase respectively over the prior year. Consequently, Adjusted EBITDA jumped 263% to $143 million, and net income reached $72 million, overcoming a loss in Q1 2025. The company’s cash cost per ton dropped 14% to $96, benefiting from Blue Creek’s low-cost profile and the 45X production tax credit. While operational results were strong, free cash flow was negative $890 million due to the final project payments and a significant working capital build. High sales volumes in March delayed cash collections, and inventory rose to 1.9 million tons. Management expects free cash flow to turn positive in Q2. Looking forward, the company reaffirmed its 2026 guidance despite potential inflationary pressures from the Middle East conflict. With the investment phase concluded, Warrior Met Coal plans to focus on shareholder returns, potentially through dividends and buybacks, leveraging its position as a high-quality, low-cost producer in the global steelmaking coal market.

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Warrior Met Coal, Inc.: Surging Paper Profits Mask Negative Cash Flow and Coordinated Executive Exits

Full Earnings Call Transcript — Q1 • 2026-04-30

Operator: Good day, and welcome to the Warrior Met Coal, Inc. first quarter 2026 conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone, and to withdraw your question, star then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Brian M. Chopin. Please go ahead, sir.
Brian M. Chopin: Good afternoon, and welcome, everyone, to Warrior Met Coal, Inc.’s first quarter 2026 earnings conference call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements by their nature address matters that are to different degrees uncertain. These uncertainties, which are described in more detail in the company's annual and quarterly reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements. We do not undertake to update our forward-looking statements whether as a result of new information, future events, or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. We will also be discussing certain non-GAAP financial measures which are defined and reconciled to comparable GAAP financial measures in our first quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-Q for the quarter ended March 31, 2026, with the SEC this afternoon. You can find additional information regarding the company on our website at warriormetcoal.com, which also includes a first quarter supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walter J. Scheller, Chief Executive Officer, and Mr. Dale W. Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer any questions. With that, I will now turn the call over to Walter J. Scheller.
Walter J. Scheller: Thanks, Brian. Hello, everyone, and thanks for taking the time to join us today to discuss our first quarter 2026 results. I will start by providing an overview of the quarter before Dale reviews our results in additional detail. The first quarter marked a defining milestone for Warrior Met Coal, Inc. We completed the final construction and project spending associated with the development of our transformational Blue Creek mine, delivering the project ahead of schedule and fully in line with our capital expenditure guidance. This achievement reflects years of planning, disciplined capital allocation, and exceptional execution by our team and concludes the construction and investment phase of Blue Creek. Our total project capital expenditures were a little over $1 billion. As a reminder, this is on budget and fully paid out of cash from operations without incurring any funded debt. The new Blue Creek mine was a major contributor to higher volumes and profitability in 2026, which led to record quarterly sales and production volumes. Our first quarter volumes were higher than our internal plans and are expected to be higher for the remainder of the year to meet our full-year outlook and guidance. As we look at the first quarter steelmaking coal market conditions, pricing remained notably strong in the premium quality segment and well above our original expectations, while the High Vol A quality segment underperformed expectations. We believe this strength in premium quality pricing was driven by tightness in the segment resulting from supply constraints stemming from weather disruptions and mine production-related challenges in Australia. These factors drove up premium quality prices by 15% in January, leading to noticeably higher demand for our Mine 7 premium quality product. As Australian supply chains have begun to recover from these events, the emergence of a new conflict in the Middle East introduced additional cost pressures, specifically in freight markets, while increasing the uncertainty around global energy availability. Steelmaking coal prices have remained strong as inflationary cost pressures from the rise in oil and diesel prices have asserted a firmer floor despite soft seaborne demand, especially in the spot market. However, from a global seaborne demand perspective, India continues to be a key market supported by firm domestic steel prices, improving margins, and growing steel production, which has helped sustain demand for high-quality steelmaking coal. Global pig iron production decreased by 2.1% for the first two months of 2026 as compared to the same period last year. India continued to demonstrate strength, showing a 3.1% increase for the same period. Chinese pig iron production declined by 2.7% during the two-month period. Our primary index, the PLV FOB Australia, rose very quickly in the first quarter as a result of supply constraints stemming from the previously discussed challenges in Australia, reaching a high of $229 in early February and averaging $213 per short ton. The index average was 17%, or $31 per ton, higher than the fourth quarter 2025 and was 27% higher than 2025. As for main second-tier indices, the Australian LVHCC index price experienced more modest gains and averaged $173 per short ton for the first quarter. This is $19 per ton, or 12%, higher than the fourth quarter 2025, and 30% higher than 2025. As a result, the relativity of the Australian LVHCC index price to the Australian PLV index price decreased from 85% in fourth quarter 2025 to 81% for 2026. In contrast to the Australian LVHCC index price, the average U.S. East Coast HVA index price only increased $8 per ton, or 6%, in the first quarter from 2025 and averaged $144 per short ton. As a result, the relativity decreased from 75% in 2025 to 68% for 2026. More importantly, this relativity dropped to an all-time low of 62% for a brief period during the first quarter and represents a significant spread difference with the Pacific Basin relativity. We achieved a gross price realization of 72% for the first quarter compared to 75% in 2025. Our gross price realization was lower and driven by a combination of factors. First, while the average of both main pricing indices increased in the first quarter compared to the fourth quarter 2025, the price spreads, or relativity, have widened, reaching one of the lowest values ever recorded. Second, our sales mix of High Vol A quality was 11% higher. Third, that higher sales mix was primarily sold in the Pacific Basin on a CFR basis with higher average freight rates due to the conflict in the Middle East. We sold 4% more volume into the Pacific Basin in the first quarter than in 2025. Warrior Met Coal, Inc. achieved a record high quarterly sales volume in the first quarter of 3 million short tons compared to 2.2 million tons in the same quarter of 2025. This represents a 38% increase, primarily due to the additional sales volume from the new Blue Creek mine. Our first quarter sales volume mix was 61% High Vol A, representing a 10% increase over the fourth quarter 2025. As production from Blue Creek continues to increase, we expect our sales volume mix to become more weighted toward High Vol A products and Pacific Basin destinations over time. Our sales by geography in the first quarter break down as follows: 61% into Asia, 25% into Europe, and 14% into South America. Our spot volume was 6% for the first quarter 2026. Sales volumes in the Pacific Basin were 61% for the first quarter, which were 4% higher than the fourth quarter 2025 and 18% higher than the first quarter of last year. Production volume in the first quarter 2026 was a record high 3.5 million short tons compared to 2.3 million in the same quarter of last year, representing a 55% increase. This increase reflects the significant contribution of Blue Creek. Our coal inventory levels increased to 1.9 million short tons at March 31, 2026, compared to 1.6 million tons at December 31, 2025. We expect to manage the excess inventory over the remainder of the year to maximize sales volume, profitability, and free cash flow. I will now ask Dale to address our first quarter results in greater detail.
Dale W. Boyles: Thanks, Walt. Let me first highlight our first quarter financial results compared to 2025. Our first quarter adjusted EBITDA of $143 million was 54% higher than 2025, primarily due to the following factors—two positives offset by two negatives. First, our sales volumes were 4% higher in the first quarter, driven by an increase of tons sold from Blue Creek. Second, our average net selling price was $20 per ton, or 15%, higher in the first quarter primarily due to a 10% higher mix of High Vol A volume sold into the Pacific Basin on a CFR basis at elevated freight rates. Third, cash cost per ton were $2 higher in the first quarter, primarily attributable to higher variable costs for transportation and royalties, and were partially offset by Blue Creek's inherently low-cost structure and a $3 per ton benefit from the new 45X production tax credit from the One Big Beautiful Bill Act. And finally, operating cash flows were negative $12 million, which was $88 million lower than 2025. This result is attributed to the increase in working capital, primarily for accounts receivable and inventory. Accounts receivable were higher on higher sales volumes and higher steelmaking coal prices. In addition, sales volume for the quarter was heavily weighted to the month of March by 43%. Our spending for capital expenditures and mine development were a combined $24 million lower in the first quarter compared to 2025, primarily due to lower investments in Blue Creek. Now let me compare 2026 to the prior year's first quarter results. We recorded net income of $72 million, or $1.37 per diluted share, in the first quarter this year, compared to a net loss of $8 million, or $0.16 per diluted share, in the same quarter of 2025. We reported adjusted EBITDA of $143 million in 2026 compared to $39 million in the same quarter of 2025, an increase of 263%. Our adjusted EBITDA margin improved to 31% in 2026 compared to 13% in the same quarter of last year. On a per-ton basis, our adjusted EBITDA margin improved to $48 per short ton for 2026 compared to $18 in last year's first quarter. The primary drivers of these improvements were a 38% increase in sales volumes, a 10% increase in average net selling price, and a 14% reduction in cash costs, reflecting the increasing contribution from our new Blue Creek mine. Total revenues were $459 million in the first quarter of this year compared to $300 million in the same quarter of last year. The total increase of $159 million was primarily due to the impact of higher sales volumes of $113 million and the impact of an increase in average gross selling prices of $69 million. This was partially offset by the impact of a higher mix of High Vol A tons sold of $24 million. In addition, the bridge and other charges were $4 million higher compared to last year's first quarter. This resulted in an average net selling price of $149 per short ton in 2026, compared to $136 in the first quarter of last year. Cash cost of sales were $289 million, or 64% of mining revenues, in the first quarter of this year, compared to $244 million, or 83% of mining revenues, in the first quarter of last year. Of the $45 million net increase in cash cost of sales, there was a $93 million increase in costs which were attributed to the 38% increase in sales volumes and slightly higher variable transportation and royalty costs on higher average steelmaking coal price indices. These higher costs were partially offset by $48 million of lower costs that were driven by the leverage of lower-cost Blue Creek tons sold and $8 million of benefit from the 45X production tax credit. Cash cost of sales per short ton FOB port was approximately $96 in 2026 compared to $112 in the same quarter last year. The 14% decrease was primarily due to the factors I just mentioned on a dollar basis. Cash margins per short ton increased 127% to $53 in the first quarter from $23 in the same quarter of last year. Our first quarter 2026 SG&A expenses were $28 million and were $10 million higher than the same quarter of 2025, primarily due to higher employee-related expenses, including stock compensation expenses. SG&A expenses are on track with our full-year outlook and guidance. Depreciation and depletion expenses were $52 million in the first quarter, which was 15% higher than 2025, primarily due to the additional assets placed into service at Blue Creek and the higher sales volume in 2026. We recorded income tax expense of approximately $6 million on pretax income of $79 million in 2026. Our effective income tax rate varied from the statutory federal income tax rate of 21% primarily due to tax benefits recognized for depletion expense and a foreign-derived intangible income deduction, resulting in an effective income tax rate of 11%. Now let us turn to cash flows for 2026. Cash flows from operating activities were a negative $12 million in 2026 and were $23 million lower than the previous year's first quarter. Working capital increased by $146 million during the first quarter, primarily due to $115 million of higher accounts receivable. This outcome was primarily attributed to higher sales volumes, higher steelmaking coal prices, and the timing of quarterly sales volumes that were 43% weighted to the month of March, thereby pushing cash collections into the second quarter. In addition, inventory was higher as production exceeded sales volume during the first quarter. Free cash flow was a negative $890 million due to $12 million of cash used by operations combined with cash used for capital expenditures of $80 million. This outcome of negative free cash flow was expected and previously communicated on our last earnings call in February. Capital spending included the final $66 million invested for the completion of the Blue Creek development project. Our free cash flow was slightly more negative than anticipated in the first quarter, primarily due to timing of sales volume, and is expected to turn positive in the second quarter. We are pleased that we continue to maintain strong liquidity while delivering higher profitability. The total available liquidity at the end of the first quarter was $364 million and consisted of cash and cash equivalents of $[inaudible], short-term investments of $20 million, and $141 million available under our ABL facility. Finally, let me turn to our current outlook and guidance for the full year 2026, as detailed in our earnings release. We expect the steelmaking coal markets to remain generally consistent with recent trends absent any major disruptions in supply or demand, or a prolonged conflict in the Middle East. First quarter results were all on track and generally consistent with our expectations for the full year, and that is why we are reaffirming our outlook and guidance for 2026 as previously communicated in February. Having said that, there are a few cautionary notes to keep in mind. We are beginning to see some inflationary cost pressures on materials and supplies, such as steel roof supports, insurer bits, as well as diesel fuel. In addition, we are experiencing some tariffs and higher shipping costs on these raw materials. While we have not been materially impacted by inflation so far this year, we believe the remainder of the year could see an increase of a few dollars per ton. At this point, it is extremely difficult to predict any full-year impact to our cash costs. Obviously, we are taking all possible measures to mitigate any impacts of inflation. I will now turn it back to Walt for his final comments.
Walter J. Scheller: Thanks, Dale. Warrior Met Coal, Inc. performed very well in the first quarter and our financial and operational results were better than expected as premium quality steelmaking coal prices were higher for a longer period of time and our volumes were slightly ahead of our internal plans. This strong beginning to 2026 supports our full-year outlook and guidance. Our current view of the steel and steelmaking coal markets is both positive and resilient. While we face uncertainty from the Middle East conflict and its effect on the global economy, at this point, the full impact of the conflict and its length are not quantifiable on the full year. As Dale noted, we may have to contend with some inflationary cost pressures. But right now, we see these potential impacts outweighed by higher production as a result of European protectionist measures and rising steel prices across nearly all geographies. As is often the case in such dynamic and unpredictable environments, disruptions may create short-term or region-specific opportunities that we fully intend to take advantage of. For now, expect steelmaking coal prices to remain above their 2025 average levels absent material changes in supply and demand. Most importantly, Warrior Met Coal, Inc. has the tools to continue to drive value creation for our stockholders by continuing to execute our strategy to optimize production, control our costs, and generate free cash flow. With our high-quality assets and low first quartile cost structure, we are as well positioned as we have ever been to thrive in a wide range of steelmaking coal environments. We will now open the call for questions. Operator?
Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question for today will come from Nicholas Giles with B. Riley. Please go ahead.
Nicholas Giles: Thanks, operator. Good evening, guys. My first question was just, obviously a fairly meaningful working capital build in 1Q, which you had foreshadowed. How much of this could we see unwind in the second quarter? And then another question would be, can you remind us of the cash flow and balance sheet implications for the 45X production tax credit? How much did that contribute to the build, if any? Thanks.
Dale W. Boyles: Hey, Nick, it is Dale. Yes, it is hard to predict exactly how much of the working capital will turn around, but it is timing. A large portion will come back. I am not sure we will be back to breakeven. We will be shy of that probably on a year-to-date basis through the first half. As far as the 45X credit, that was worth about $8.4 million, or $3 a ton, for the quarter.
Nicholas Giles: Understood. Thanks for that, Dale. You mentioned some initial inflationary pressures stemming from the conflict. I think Warrior Met Coal, Inc. is more insulated, but can you speak to the diesel usage across your operating platform, or if you have any kind of sensitivity or total consumption, just so we can try and understand that impact? Thanks.
Walter J. Scheller: We do not do a lot of trucking of coal. We do truck a little bit to the barge load-out, so we are not a high user like strip mines or surface mines. We just do not use a lot of diesel. I do not have a projection for you because I have no idea how long oil prices will stay this high and what those pass-throughs could be. We are subject to pass-through surcharges and things like that, but as I said earlier, we have not seen anything material yet. It depends on how long this continues, so we could see some increase later in the year. We are seeing some other things, like the bits—that is tungsten coming out of China—and that is a challenge right now. We are starting to see and hear it from some other suppliers too on other materials and supplies. We just have not been able to quantify it yet. We are working hard to look for alternative vendors and sources—anything we can do to mitigate it.
Nicholas Giles: Understood. That is still helpful perspective. Just one more if I could. Inventories have been rising for the past couple of quarters—I think 1.9 million tons is what you said. Most of the working capital build, I think, was more from receivables. Can you speak to how you could see those inventories unwind in the coming quarters, and what kind of mix we are working with? I assume it is mostly Blue Creek product.
Walter J. Scheller: Our sales projections for Blue Creek are actually ahead of schedule from where we thought we would be in terms of placing Blue Creek for the year. It is just production levels have been so much higher that they surpassed our expectations. As we look out through the remainder of the year, we are still doing tests with different potential customers on Blue Creek, and the hope is to get more and more of that coal put to bed. When we look at how much of it is moving in the spot market, it is very little. As we put those tons to bed, we are going to do everything we can to bring inventory back down to what we consider to be a more normal level. It is going to take us all year to work at it. You will see a gradual decline over the next few quarters—nothing dramatic in a single quarter. The mines are running well, so production is coming in pretty good. And obviously, the highest amount of production or inventory that we have is High Vol A.
Nicholas Giles: Got it. Okay. Well, sounds like a first-class problem to me. Thanks, guys.
Walter J. Scheller: Thank you.
Operator: The next question will come from Katja Jancic with BMO Capital Markets. Please go ahead.
Katja Jancic: Hi, thank you for taking my questions. Maybe first on the volume that you ship to the Pacific Basin. So the 60% that you shipped there in 1Q—how much of that is on a CFR basis? And can you talk a little bit about the current freight cost to ship—what it currently is versus, let us say, recent quarters? And one last one: you mentioned all your operations are operating very well. Do you have any limitations on how much inventory you can hold at any time?
Dale W. Boyles: All of it is on a CFR basis.
Walter J. Scheller: Freight rates are averaging much higher. I know we saw some freight rates last week in the mid-$50s. I think it is averaging somewhere in the upper $40s for the second quarter, so it has been pretty significant. As for inventory limits, not really. From where we are today, we can hold a lot more inventory. You have to remember, a lot of this is Blue Creek, and Blue Creek, given its design, has multiple places where we can store significant amounts of inventory. So we are not bounded by anything at this point.
Katja Jancic: Okay. Thank you.
Operator: The next question will come from Nathan Pierson Martin with The Benchmark Company. Please go ahead.
Nathan Pierson Martin: Thanks, operator. Good afternoon, gentlemen. Congrats on wrapping up Blue Creek. Now that the project has wrapped up, it would be great to hear about what your priorities are for free cash flow and shareholder returns going forward.
Dale W. Boyles: Once we start to generate cash going forward, we would look to provide more shareholder returns since we have not done so in the last few months and quarters. It is hard to say exactly when—it depends on when we start to generate the cash and have it available to distribute. If we turn positive in the second half, it could be sometime in the second half, maybe the latter part of the year. That would be the earliest I think you could see or expect anything.
Nathan Pierson Martin: Appreciate that, Dale. And what form—do you have any preference there? I know historically you have done the regular dividend but also some special dividends. Any thoughts on that versus maybe buybacks?
Walter J. Scheller: We think we will stick to something similar to what we have used in the past, which is a rising fixed quarterly dividend supplemented by special dividends and some selected stock buybacks. That has done well for our shareholders that have held on to our stock over time. We have one of the highest PSRs over the last ten years in the sector, and that has worked really well for us.
Nathan Pierson Martin: Got it. Appreciate that. And then any thoughts from you guys on how the recent Section 303 determination signed by the administration could impact Warrior Met Coal, Inc.’s business?
Walter J. Scheller: If we look at it right now, things are going to continue to move as they are today. I do not think there are going to be any significant changes, so I do not think there will be much of an impact.
Nathan Pierson Martin: I appreciate that, Walt. I will leave it there. Continued best of luck. Thanks.
Walter J. Scheller: Thanks, Nate.
Operator: That will conclude our question and answer session for today. I would like to turn the conference back over to Mr. Walter J. Scheller for any closing remarks. Please go ahead.
Walter J. Scheller: That concludes our call this afternoon. Thank you again for joining us today, and we appreciate your interest in Warrior Met Coal, Inc.
Operator: Thank you for attending today's presentation. You may now disconnect.