Warrior Met Coal’s Mixed Earnings Call: Achievements & Challenges

Warrior Met Coal ((HCC)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call of Warrior Met Coal revealed a mixed sentiment, highlighting both operational achievements and significant market challenges. While the company has made notable progress in its Blue Creek project and reported increased sales and production volumes, it is also grappling with pricing pressures and a substantial decline in net income, resulting in negative free cash flow.

Acceleration of Blue Creek Longwall Startup

Warrior Met Coal announced that the longwall startup for its Blue Creek project has been accelerated to early Q1 2026, ahead of schedule. This advancement is marked by the first commercial sales of steelmaking coal from Blue Creek occurring a quarter early, signifying a crucial milestone for the company.

Increased Sales and Production Volume

The company reported a 6% increase in sales volume, reaching 2.2 million short tons, and a similar increase in production volume to 2.3 million short tons compared to the same quarter last year. This growth reflects Warrior’s robust operational capabilities despite challenging market conditions.

Strong Operational Performance

Warrior Met Coal maintained positive cash margins and generated positive operating cash flows, even amidst market challenges. The cash cost of sales per ton decreased by 18% from the previous year, showcasing effective cost management and operational efficiency.

Cost Control Measures

The company implemented effective cost control measures, resulting in lower production costs and a reduction in SG&A expenses by $4 million compared to the same quarter last year. These efforts underscore Warrior’s commitment to maintaining financial discipline.

Significant Progress on Blue Creek Project

Warrior Met Coal has made significant progress on the Blue Creek project, which remains on budget with $823 million spent to date. Key infrastructure elements, such as the truck dump and rail loadout, have been completed, positioning the project for future success.

Decline in Average Net Selling Prices

The average premium low-vol steelmaking coal index prices declined by 24% compared to the second quarter last year and 33% year-over-year through June. This decline has significantly impacted Warrior’s financial performance.

Reduced Net Income

Warrior Met Coal’s net income decreased significantly to $6 million from $71 million in the same quarter of 2024. This reduction is primarily attributed to lower average net selling prices, which have affected the company’s profitability.

Market Challenges and Pricing Pressure

The company continues to face pricing pressure from a well-supplied steelmaking coal market and excess Chinese steel exports. These factors have impacted Warrior’s pricing and sales strategies, posing challenges to its financial performance.

Negative Free Cash Flow

Warrior Met Coal reported a negative free cash flow of $57 million due to high capital expenditures and mine development costs. However, excluding investments in Blue Creek, the underlying business generated positive free cash flow, indicating potential for future financial stability.

Forward-Looking Guidance

Looking ahead, Warrior Met Coal has provided guidance on several key metrics. The company expects the Blue Creek longwall startup to occur in early Q1 2026, with first commercial sales already achieved ahead of schedule. Sales volume is projected to increase, with a significant portion directed to Asia, Europe, and South America. The company has updated its cash cost of sales guidance and anticipates positive impacts from the One Big Beautiful Bill Act, which classifies metallurgical coal as a critical mineral eligible for a tax credit, expected to benefit Warrior’s financials from 2026.

In summary, Warrior Met Coal’s earnings call reflects a mixed sentiment, with notable achievements in operational performance and project milestones counterbalanced by significant market challenges and pricing pressures. The company’s strategic initiatives and cost control measures position it for potential future growth, despite current financial hurdles.