Core Natural Resources, Inc. Q2 FY2023 earnings call

• Tracy Robinson discussed executing the plan laid out at Investor Day, managing through external weather and port issues, and the importance of the scheduled operating model. • Ed Harris highlighted operating metrics like car velocity averaging 216 miles per day (up 3% year-over-year), origin train performance above 90%, efforts to protect infrastructure from wildfires with sprinkler systems and Poseidon firefighting trains, and adjustments to operating plans due to lower volumes. • Doug MacDonald provided market outlook, noting softer demand for consumer-related products, strong bulk business lines, impact of the ILWU strike, and updates on Falcon service. • Ghislain Houle detailed financial results, including impact of wildfires on EPS and OR, changes in expenses like labor and fuel, and revised guidance for 2023.

Second quarter revenues were $4.1 billion, down 7% versus last year on 8% lower RTMs. Bulk business lines showed strength with RTMs up 12%. Intermodal, forest products, petroleum, and chemicals segments were softer. Canadian grain was a bright spot with close to 50% more RTMs versus last year. Operating income was around $1.6 billion, 10% lower than adjusted operating income last year. Operating ratio was 60.6%, up 160 basis points. EPS for the quarter was $1.76, 9% lower than last year on an adjusted basis.

• Revised year-end outlook to expect flat to slightly negative annual adjusted EPS due to softer economy and delayed recovery of intermodal demand into 2024. • Previously expected mid-single-digit growth, now guiding for flat to slightly negative EPS growth in 2023. • Assumes FX of approximately $0.75 and WTI of USD 75 per barrel.

• External weather-related issues impacting operations and volumes. • West Coast port strike affecting supply chains. • Economic weakness leading to softer volume market, particularly in some commodity segments. • Wildfires in Canada impacting infrastructure and customer operations.

Q: In terms of your latest view that the recovery will be pushed into 2024, I was just hoping for a bit of color on what you're expecting for the peak season this year and whether your thinking is that the 2024 recovery will be evident prior to or after the Chinese New Year holiday?

A: Doug MacDonald said customers are expecting a weaker-than-expected Q3, Q4, and they're forecasting a normal year beyond that based on customer input.

Q: Maybe as a follow-up to that question, I think your macro outlook for the rest of the year going '24 is a touch more bearish than what you've heard from many of your rail and trucking peers so far. So again, do you feel like it's something reasonably unique to the end markets you're exposed to, the geographies you're exposed to? Or do you feel like are you being more conservative? Or do you feel like it's just some realization that hasn't fully sunk in yet for everybody else?

A: Doug MacDonald stated they can only forecast based on what their customers are telling them, and everyone is a bit bearish for the rest of the year with more positivity starting in 2024.

Q: So you said a couple of times adjusting the hiring plan. Any color on exactly what you're doing with headcount going forward in the back half of the year? And then I thought I heard a comment about short-haul pricing slowing a little bit. Maybe just talk more broadly what you're seeing from a pricing renewal standpoint and how pricing is holding up?

A: Tracy Robinson said they have slowed or paused hiring in some areas based on expected volumes, and Doug MacDonald noted price pressures in the short-haul trucking market within intermodal as a key competition area.