PEABODY ENERGY CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Centurion Progress: Making progress towards first quarter 2026 longwall production; produced first development coal, commissioned 2 continuous mining units, prep plant washed first coal in Sept. Accelerated CapEx by ~$30 million due to rapid development.
• Wambo Mine: Reevaluated closure, bringing it forward to mid-2025; 2025 production expected at ~800,000 tonnes, ~400,000 tonnes less than 2024.
• Market Insights: Seaborne thermal demand grows in Asia; metallurgical coal market volatile with China as spot clearing market; U.S. electricity generation up, South PRB production increased 33% QoQ.
• Financials: Recorded net income of $101.3 million ($0.74 per diluted share), adjusted EBITDA $224.8 million, operating cash flow $360 million, available free cash flow $263.2 million. Completed $100 million share repurchase in Q3.

Segment Performance

• Seaborne thermal: Recorded adjusted EBITDA of $120 million, $16 million better than prior quarter. Wilpinjong and Wambo increased production with lower costs per tonne ($47), EBITDA margin at 38%. Production exceeded sales by 300,000 tonnes, increasing fourth quarter sales volumes.
• Seaborne metallurgical: Generated approximately $28 million in adjusted EBITDA. Shoal Creek shipped 125,000 tonnes in Q3; expected higher shipments in Q4 with improved spot prices.
• U.S. thermal: Produced $80 million in adjusted EBITDA, $27 million better than Q2. PRB shipped 22.1 million tonnes with adjusted EBITDA of $51.7 million, margins doubling. Other U.S. thermal mines had $28 million in adjusted EBITDA.

Guidance

• Seaborne thermal volumes expected to be 200,000 tonnes higher at 16.2 million tonnes; other U.S. thermal costs up $2 to $45 per tonne.
• Added $50 million to 2024 CapEx, primarily for Centurion and Wambo.
• Q4 seaborne thermal volumes expected at 4.1 million tonnes (2.5 million export tonnes); seaborne metallurgical volumes forecasted at 2.3 million tonnes; PRB shipments expected at 21.2 million tonnes; other U.S. thermal shipments at 3.9 million tonnes.

Risks

• Geological challenges at Wambo underground mine impacting production timelines.
• Logistics issues like Black Warrior River closure affecting Shoal Creek shipments.
• Market volatility in metallurgical coal prices and low natural gas prices impacting U.S. thermal operations.

Question and Answer

• Q: On surety obligations and potential capital unlocking A: Mark Spurbeck said bonding requirements not expected to change significantly; no substantial changes anticipated outside law/footprint changes.
• Q: On met coal costs and Shoal Creek shipments A: Mark Spurbeck discussed Q4 Shoal Creek shipments expected to increase, with net-net production changes and modest cost decrease; Malcolm Roberts mentioned Shoal Creek Q4 shipments around 600,000-700,000 tonnes targeting China/Southeast Asia spot markets.
• Q: On capital returns and buybacks A: Mark Spurbeck said committed to 65%-100% of free cash flow for share buybacks, with flexibility to accelerate if opportunities arise.
• Q: On Wambo shutdown and Shoal Creek shipments A: Jim Grech discussed Wambo 2025 production at ~800,000 tonnes; Malcolm Roberts provided details on Shoal Creek Q4 volumes and market targeting.
• Q: On CapEx and Centurion A: Mark Spurbeck explained $50 million CapEx increase, with $30 million for Centurion due to accelerated development; $10 million for Wambo open-cut capital.
• Q: On Wambo EBITDA contribution and M&A A: Mark Spurbeck couldn't provide Wambo EBITDA ballpark; Jim Grech didn't comment on M&A activity.
• Q: On PRB leases and election A: Jim Grech and Mark Spurbeck discussed PRB lease reserves, stating they have strong lease holdings for decades to come.