PEABODY ENERGY CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Cost Control: Peabody's team achieved cost control in the first quarter, with seaborne thermal and met coal segments and U.S. thermal segments coming in below expectations.
• Centurion Mine: On budget and ahead of schedule, with production ramp-up slated for early next year, expected to have a low cost structure and high realizations.
• White House Event: Executive orders to revitalize the U.S. coal industry and expand coal-fired generation, aiming to defer coal plant retirements and increase utilization.
• Acquisition of Australian Mines: Notified Anglo of a material adverse change related to the Moranbah North Mine gas ignition event, creating uncertainty around the acquisition.
• Market Fundamentals:
  • U.S. generation was strong, drawing down stockpiles; the EIA projects a 5% increase in coal generation for the full year.
  • Seaborne thermal coal prices reached four-year lows, with production rationalization expected.
  • Seaborne metallurgical coal markets were weak early, but elements in place for price recovery, with India driving growth in metallurgical coal demand

Segment Performance

• Seaborne Thermal: Recorded $84 million of adjusted EBITDA with 32% margins. Wilpinjong exceeded production forecasts, exporting an additional 400,000 tons and achieving average cost per ton $6 below first quarter guidance. Q2 guidance: Seaborne Thermal volumes expected to be 4 million tons, costs between $45 and $50 per ton.
• Seaborne Metallurgical: Reported $13 million of adjusted EBITDA. Lagging market conditions led to slowed return from longwall move at Shoal Creek and increased stockpiles. Q2 guidance: Seaborne Met expected to be 2.2 million tons, costs between $120 and $130 per ton.
• U.S. Thermal Mines:
  • U.S. Thermal (PRB): Generated $69 million of adjusted EBITDA, shipping 19.6 million tons and with costs at the low end of expectations. Q2 guidance: PRB expected to ship 19 million tons, costs in the range of $12.50 to $13 per ton.
  • Other U.S. Thermal: Generated $33 million of adjusted EBITDA, with sales modestly less than expected as stockpiles were replenished. Q2 guidance: Other U.S. thermal coal shipments expected to increase to 3.3 million tons, costs between $41 and $45 per ton

Guidance

• First Quarter Results: Recorded net income attributable to common stockholders of $34 million or $0.27 per diluted share and adjusted EBITDA of $144 million, with free cash flow of $30 million.
• Second Quarter Outlook: Seaborne Thermal expected to be 4 million tons, Seaborne Met 2.2 million tons, PRB 19 million tons, and other U.S. thermal coal shipments 3.3 million tons.
• Full Year: Anticipates increasing demand throughout the year, with the Centurion Mine expected to garner the highest margins in the Peabody system over time

Risks

• Moranbah North Mine: Gas ignition event at Moranbah North Mine created a material adverse change, introducing uncertainty around the resumption of longwall production and potential impact on the acquisition of Australian steelmaking coal mines

Question and Answer

• Q: Outline the process regarding the Moranbah North MAC notification and what constitutes sustainable longwall production? A: Jim Grech stated there is a 10-day response period from Anglo, with up to a 90-day cure period. Sustainable longwall production requires a longwall to be up and running well for a period of time
• Q: What is the impact of the Moranbah North issue on financing? A: Mark Spurbeck said financing is on hold due to the uncertainty surrounding the Moranbah North Mine issues
• Q: Discuss the restart of the Shoal Creek Mine and its cost impact? A: Malcolm Roberts said they held back sales to ensure product placement, and Mark Spurbeck noted Shoal Creek did not help costs in the first quarter
• Q: How do the executive orders impact Peabody's business? **A: Jim Grech said executive orders help defer coal plant retirements, increase utilization, and drive interest in long-term coal contracts