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Signature Sponsor
February 20, 2025 - Core Natural Resources, Inc. (NYSE: CNR) has reported financial and operating results for the period ended December 31, 2024.
Management Comments "The Core team is off to an excellent start in integrating the combined operating, marketing and logistics portfolio into a cohesive, high-performing unit; capturing the substantial synergies created by this transformational merger; and laying the foundation for long-term value creation via the tight alignment of its global metallurgical and high calorific value thermal segments," said Paul A. Lang, Core's chief executive officer. Shareholder Return Framework "Core's board of directors recently adopted a capital return framework designed to reward shareholders for their strong, ongoing support," Lang said. "The centerpiece of this framework is the targeted return to shareholders of around 75 percent of free cash flow, with the significant majority of that return directed to share repurchases complemented by a sustaining quarterly dividend of $0.10 per share." In strong support of this new framework, the board authorized a total of $1.0 billion in share repurchases. Leer South Update On January 15, 2025, Core announced that it was sealing Leer South's active longwall panel to extinguish isolated combustion-related activity there. Since that time, the Leer South team – in close collaboration with federal and state regulators – has safely re-entered the mine and resumed development work with continuous miner units. Additionally, the team has assessed – via the deployment of infrared cameras and other monitoring activities – that the mine's longwall equipment was largely unaffected by the event. "On behalf of the board and the entire senior management team, I want to again commend the operations team as well as federal and state regulators for their exceptional work in managing this situation in a safe and efficient manner," Lang said. "The team's great efforts have placed us well on track to resume longwall production mid-year, in keeping with our originally indicated timeline." Synergy Update The Core team is sharply focused on driving forward with capturing the already identified $110 million to $140 million in synergies created by the combination. "In the five weeks since the merger's completion, the team has executed on strategies that are expected to yield approximately one third of that value – at the midpoint of guidance – via the streamlining of the operational and corporate structure, coal blending opportunities, and early progress in the procurement arena," Lang said. "Simultaneously, we are exploring additional avenues for value creation – via the sharing of best practices and the harnessing of the Core team's collective expertise and creativity – as we seek to ensure that Core delivers on its vast potential." Financial and Liquidity Update Upon the merger's closing on January 14, 2025, Core had total liquidity of $1.1 billion, including $590 million in cash and cash equivalents and short-term investments. As previously announced, in connection with the closing of the merger, Core recently amended and extended the legacy CONSOL revolving credit facility, upsizing the facility commitments to $600 million from the previous $355 million while extending the maturity to April 30, 2029. Additionally, Core successfully reduced the annual interest rate by 75 basis points while further enhancing financial flexibility. Prior to the merger's close, CONSOL purchased at par – and in lieu of redemption – Arch's outstanding tax-exempt bonds for $98.1 million and plans to remarket these bonds at a later date, subject to market conditions. The Company projects merger-related cash expenditures of around $100 million during 2025, as well as the expenditure of around $30 million related to the combustion-related event at Leer South. Core estimates that capital expenditures will total between $300 million and $330 million during 2025. "Even with these projected uses of cash, we expect to have excess cash available to deploy to the capital return program during the balance of 2025," said Mitesh Thakkar, Core's president and chief financial officer. "In addition, we expect the continued progress in synergy capture, along with the remarketing of the tax-exempt bonds, to provide a tailwind in terms of projected cash availability." The Core board has declared a $0.10 per share quarterly dividend, payable on March 17, 2025, to stockholders of record on March 3, 2025. Operating Results During the fourth quarter of 2024 – which was prior to the closing of the merger with Arch Resources in January 2025 – legacy CONSOL Energy generated GAAP net income of $30.8 million and adjusted EBITDA1 of $170.0 million, which included one-time items such as the reserve for indemnification of the 1974 Plan litigation and merger-related expenses. CONSOL sold 7.0 million tons of Pennsylvania Mining Complex ("PAMC") coal during the fourth quarter, generating coal revenue of $442.8 million for the PAMC segment and an average coal revenue per ton sold of $63.28. The average cash cost of coal sold per ton1 for the PAMC segment was $36.46. 1 - "Adjusted EBITDA," "Cost of Coal Sold" and "Cash Cost of Coal Sold" are non-GAAP financial measures and "Average Cash Cost of Coal Sold per Ton" is an operating ratio derived from non-GAAP financial measures, each of which is reconciled to the most directly comparable GAAP financial measures below, under the caption "Reconciliation of Non-GAAP Financial Measures". Market Dynamics Core's two principal lines of business – metallurgical coal and high calorific value thermal coal – are experiencing soft market conditions at present, with API-2 and High-Vol A coking coal both trading at close to a three-year low. In the high calorific value thermal segment, Core's substantial committed position – at relatively advantageous pricing – is acting to counterbalance the current softness. At present, the high C.V. thermal segment has a committed and priced position – inclusive of select collared volumes – of approximately 24.0 million tons at a projected price of between $61 and $63 per ton. Meanwhile, the domestic thermal market in PAMC's core market area is showing signs of tightening in the wake of colder-than-normal temperatures in January and February. Despite currently weak pricing levels, long-term market dynamics for Core's metallurgical segment remain robust. New blast furnace capacity continues to come online across Southeast Asia, and Indian imports of seaborne coking coal continue to march higher, climbing an estimated 5 percent in 2024. In addition, Chinese imports of seaborne coking coal increased by around 17 million tons in 2024, a trend that is acting to counterbalance higher Chinese steel exports. On the supply side, aggregate production in the primary supply countries for high-quality seaborne coking coal – Australia, the U.S., and Canada – remains around 40 million tons lower in 2024 than during the peak year a decade ago, despite historically strong pricing across that timeframe. Moreover, current pricing levels appear to be inducing supply rationalization among small, high-cost producers, which should act to support a healthier supply-demand balance over time. Outlook "In just over a month as a combined company, the Core team has already made tremendous strides in unlocking value across a wide range of fronts," Lang said. To date, the Core team has:
"Looking ahead, we are more confident than ever that Core's two, world-class, complementary operating segments – metallurgical coal and high calorific value thermal coal – create a unique and compelling opportunity for value creation and cash generation in the years ahead," Lang said. "With its highly skilled workforce, strategic asset base, low-cost mining operations, expansive logistics network, tremendous synergy potential, and industry-leading sustainability practices, Core is exceptionally well-equipped to capitalize on what we view to be a highly constructive, durable, long-term global market environment for our core products." To see the full results with financial figures included, click here. |
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