Warrior Met Coal raises 2025 production guidance by 10% and accelerates Blue Creek longwall start-up

Earnings Call Insights: Warrior Met Coal (HCC) Q3 2025

MANAGEMENT VIEW

* CEO Walter Scheller highlighted a "strong financial performance to significant operational achievements," with a focus on the early start of Longwall operations at Blue Creek, which commenced "approximately 8 months ahead of schedule." He stated this was "a direct result of our unwavering commitment to operational excellence and the exceptional teamwork and dedication of our employees."
* Scheller announced that, factoring in the earlier start at Blue Creek, the company now expects to produce "approximately 1.8 million short tons of high-vol steelmaking coal from the Blue Creek mine, representing an additional 800,000 short tons this year or an 80% increase over our initial 2025 guidance."
* Full year 2025 production volume guidance has been raised by "approximately 10%."
* Scheller reported that Warrior Met Coal won the bidding in a federal coal lease sale, securing "58 million short tons of high-quality steelmaking coal reserves contiguous to our current operations," enhancing the company's reserve base and extending the life of core mining operations.
* CFO Dale Boyles stated, "Warrior was built to excel in all market conditions with high-quality steelmaking coal assets, a low-cost position globally, possessing a strong balance sheet with ample liquidity and a relentless focus on operational excellence. Each of these attributes were clearly demonstrated in our third quarter results and recent accomplishments."

OUTLOOK

* The company increased guidance for total company production and sales volumes for 2025, directly resulting from the early Blue Creek longwall start-up. Blue Creek production volume guidance was raised by 80% from 1 million to 1.8 million short tons, with expectations to sell approximately two-thirds of this production in 2025.
* Full year outlook for production volume raised by approximately 10% at the midpoint of the range.
* Boyles stated, "we lowered our guidance for cash cost of sales per ton, reflecting more recent actual results. While weak steelmaking coal market conditions are expected to persist for the remainder of the year, we remain optimistic about our long-term growth trajectory."

FINANCIAL RESULTS

* Warrior Met Coal achieved record quarterly sales volume in Q3 of 2.4 million short tons, compared to 1.9 million in the same quarter last year, a 27% increase.
* Net income for Q3 was $37 million or $0.70 per diluted share versus $42 million or $0.80 per diluted share in Q3 2024.
* Adjusted EBITDA reached $71 million in Q3, compared to $78 million in Q3 2024. EBITDA margin stood at 22%, with a per short ton margin of $30.
* Total revenues were $329 million for the quarter, up $1 million year-over-year, primarily due to higher sales volume offset by lower selling prices.
* Average net selling price was $136 per short ton, lower than $172 in Q3 2024.
* Cash cost of sales was $237 million, or $101 per short ton, compared to $230 million and $123 per short ton last year.
* Free cash flow was negative $20 million due to significant capital expenditures and mine development investments, while excluding Blue Creek investments, free cash flow was $86 million.
* Liquidity at quarter-end was $525 million, with $336 million in cash and cash equivalents.

Q&A

* Katja Jancic, BMO Capital Markets Equity Research: Asked about Blue Creek production for next year after the early start. Scheller replied, "I'm hesitant to give you an exact number on where we'll be. I think it's going to be, a lot of it is going to be market-driven as we get into next year as opposed to operationally driven."
* Jancic: Queried capital allocation as Blue Creek CapEx declines. Boyles responded, "we will return cash via different methods, which will be the fixed quarterly dividend, which I expect would be higher in the future, supplement that with some cash special dividends and possibly some stock buybacks."
* Nick Giles, B. Riley Securities: Inquired about hiring needs and inventory strategy amid increased Blue Creek output. Scheller stated, "we'll continue to hire over the next year easily and probably continuing beyond that... We don't want to build a bunch of inventory, and we don't want to flood the market either."
* Giles: Asked about mine-by-mine sales shifts in Q4. Boyles explained, "2/3 of that volume of Blue Creek for the year should be sold this year, 1.2 million tons. And we've sold about half of that so far through the end of the third quarter."
* Giles: Questioned the impact of reserve acquisition on potential expansion. Scheller indicated another longwall would require "probably $300 million or so," but emphasized, "we're years away from making that decision."
* George Eadie, UBS: Queried price realization factors and outlook for Q4. Boyles clarified, "the increase from the second quarter to the third quarter was 2 things: 6% higher sales volume and a net realized price of $6 a ton higher."
* Nathan Martin, The Benchmark Company: Asked about reaching the targeted 85–90% price realization. Boyles replied, "that's what our target is. So yes, I think we can get there. It just depends on what the markets do."
* Martin: Requested clarity on Blue Creek sales contracting. Boyles said, "it's a little early with the volume that we sold to give a percentage of how much we've contracted because of these trials."
* Martin: Asked about cost guidance and assumptions. Boyles confirmed, "the price assumption hasn't changed because the PLV has averaged virtually the same amount each and every quarter this year."

SENTIMENT ANALYSIS

* Analysts expressed a positive tone, often congratulating management on achievements, but also probed for clarity on production ramp, cost allocation, and pricing sustainability. Questions reflected underlying caution about market conditions and future profitability, especially around contracting and cost assumptions.
* Management maintained a confident yet measured tone in prepared remarks and Q&A, emphasizing operational execution and cost discipline. Scheller stated, "we're hopeful that new trade agreements with key global partners will be supportive for our market and will materialize in the near term," but repeatedly tempered optimism with caution about market uncertainties.
* Compared to the previous quarter, both management and analysts’ sentiments were slightly more positive, reflecting the accelerated Blue Creek progress and guidance increases, but cautious about pricing environment and market risks.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2025 production was raised by approximately 10%, compared to no such increase last quarter.
* Blue Creek longwall start-up occurred 8 months ahead of schedule, whereas last quarter guidance suggested an early Q1 2026 timeline.
* Sales volume, revenue, and adjusted EBITDA all increased from the previous quarter.
* Net income rose from $6 million in Q2 to $37 million in Q3, while free cash flow (excluding Blue Creek CapEx) improved.
* Management’s tone shifted from defensive in the prior quarter to more optimistic and proactive, driven by project execution and operational achievements.
* Analysts’ questions shifted focus from cost discipline and market headwinds in Q2 to capital allocation, potential for further expansion, and realization of pricing targets in Q3.

RISKS AND CONCERNS

* Management highlighted "persistent challenges in our customers' markets" due to "ongoing surplus in Chinese steel exports, heightened global trade tensions and subdued economic activity worldwide."
* Boyles warned of "additional supply coming on that's going to keep that pretty balanced," and noted, "it's hard to be too optimistic right now about what the next year or 2 looks like."
* Maintenance and repair costs are expected to potentially rise due to "potential unexpected breakdowns that would require investment to restore the equipment to a normal operating status."
* The acquisition of new reserves is not expected to immediately impact production but will strengthen long-term cost position and operational efficiency.

FINAL TAKEAWAY

Warrior Met Coal’s third quarter showcased a significant acceleration at Blue Creek, driving an upward revision of 2025 production guidance by 10% and establishing new records in sales volume. Management underscored the early and on-budget delivery of the Blue Creek longwall, the successful acquisition of substantial new reserves, and a continued focus on operational excellence and cost discipline. While persistent market headwinds and weak pricing are expected to continue, management remains committed to leveraging its strengthened asset base and flexible capital allocation to deliver long-term shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hcc/earnings/transcripts]

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