Ramaco Resources, Inc. Reports Second Quarter 2022 Financial Results

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Cision

LEXINGTON, Ky., Aug. 8, 2022 /PRNewswire/ --

  • For the second quarter of 2022, quarterly net income was $33.3 million (diluted EPS of $0.74) and Adjusted EBITDA was $57.9 million, which respectively were 235% and 220% higher than our previous second quarter records.

  • We built approximately 90,000 tons of inventory during the second quarter of 2022 due largely to continued logistical issues in the form of slow rail service. This brings the total inventory build for first half of 2022 to over 180,000 tons. Had this coal timely shipped in the first half of 2022 as expected, we believe EPS and Adjusted EBITDA would have been higher by $0.65 per share and $40 million respectively1.

  • The Company has booked total 2022 sales of roughly 2.8 million tons as of August 4 at an average sales price of roughly $214 per ton fob mine2. Approximately 200,000 tons of future production is remaining to be placed.

  • We estimate that these 2.8 million tons of committed sales currently translate into estimated 2022 net income of over $230 million (EPS of over $5.10) and Adjusted EBITDA of roughly $340 million3.

  • We recently contracted for the sale of roughly a quarter of a million tons of our metallurgical coal to European utility customers priced at thermal coal linked index pricing, which translates into a mine netback price of over $250 per short ton FOB mine2.

  • The Company announced today that it has entered into an agreement to acquire 100% of the membership interests in Maben Coal LLC ("Maben") with its 30+ million tons of low volatile coal reserves for an aggregate purchase price of $30 million. We estimate that the transaction has a payback of less than 2 years4. We anticipate initial highwall production in late 2022, reaching full production of 250,000 tons of low volatile coal in 2023. The transaction provides future optionality to increase annual production to approximately 1 million tons.

  • Our Board recently approved the expansion of the preparation plant capacity at the Elk Creek mining complex to 3.0 million tons from its current 2.1 million ton level. This expansion is expected to be complete in mid-2023.

  • We are now guiding to a higher production level of at least 4.3 million tons in 2023, up from the previous guidance of 4.0 million tons. This is as a result of the Maben acquisition and the Elk Creek plant capacity expansion. The Company has also now increased its longer-range production guidance to a future production level of approximately 6.5 million tons by 2025. This level will essentially be three times the 2.2 million tons production level for year-end 2021.

  • We have increased our growth-related capital expenditure guidance by roughly $25 million, and now expect total 2022 capital expenditures of $105 - $125 million. This increase reflects the expenditure for the Maben acquisition, the expansion of the Elk Creek processing capacity, as well as the acceleration of various equipment related capital expenditures for enhanced production from 2022 to 2023.

  • We are reducing our full-year 2022 production guidance to 2.8 – 3.1 million tons due to the previously announced methane ignition at one of the three mines at our Berwind mine complex. We have also increased our cost guidance to $89 - $97 per ton, reflecting lower expected second half tonnage from Berwind, as well as the combination of continued inflationary increase on labor and some mine costs.


1 Mine level, before corporate expenses, using YTD average spot pricing as of June 30, 2022 for tons in inventory.

2 Using forward curve pricing as of August 4, 2022 for index-linked sales.

3 Mine level, before corporate expenses, using midpoint of cost guidance and forward curve pricing as of August 4, 2022 for index-linked sales.

4 Inclusive of purchase price and all capital expenditures, based on spot API2 pricing as of August 4, 2022.

5 Using forward curve pricing as of August 4, 2022 for index-linked sales.

6 Mine level, before corporate expenses, using midpoint of cost guidance and forward curve pricing as of August 4, 2022 for index-linked sales.

7 Mine level, before corporate expenses, using YTD average spot pricing as of June 30, 2022 for tons in inventory.

8 Inclusive of purchase price and all capital expenditures, based on spot API2 pricing as of August 4, 2022.

Ramaco Resources, Inc. (NASDAQ: METC) ("Ramaco" or the "Company") today reported quarterly net income for the three months ended June 30, 2022, of $33.3 million, or $0.74 per diluted share. This was nearly 240% higher than net income for the three months ended June 30, 2021, of $9.9 million, or $0.23 per diluted share.

The Company's adjusted earnings before interest, taxes, depreciation, amortization, and equity-based compensation ("Adjusted EBITDA") was $57.9 million for the three months ended June 30, 2022. This was 220% higher than $18.1 million of Adjusted EBITDA for the three months ended June 30, 2021. (See "Reconciliation of Non-GAAP Measure" below.)

Key operational and financial metrics are presented below:



















Key Metrics



















2Q22


1Q22

Change


2Q21

Change


2Q22 YTD


2Q21 YTD

Change

Total Tons Sold ('000)


584



583

0 %



686

(15) %



1,167



1,108

5 %

Revenue ($mm)

$

138.7


$

154.9

(10) %


$

76.1

82 %


$

293.5


$

119.5

146 %

Cost of Sales ($mm)

$

76.6


$

81.3

(6) %


$

57.8

33 %


$

157.9


$

89.0

77 %

Pricing of Company Produced ($/Ton)

$

215


$

234

(8) %


$

96

124 %


$

224


$

93

140 %

Cash Cost of Sales - Company Produced ($/Ton)*

$

106


$

101

5 %


$

67

58 %


$

104


$

63

65 %

Cash Margins on Company Produced ($/Ton)

$

109


$

133

(18) %


$

29

276 %


$

120


$

30

295 %

Net Income ($mm)

$

33.3


$

41.5

(20) %


$

9.9

235 %


$

74.8


$

14.1

431 %

Diluted Earnings per Share

$

0.74


$

0.92

(20) %


$

0.23

228 %


$

1.66


$

0.32

416 %

Adjusted EBITDA ($mm)

$

57.9


$

64.1

(10) %


$

18.1

220 %


$

121.9


$

29.6

312 %

Capex ($mm)

$

34.1


$

19.7

73 %


$

4.8

606 %


$

53.8


$

8.6

529 %

Adjusted EBITDA less Capex ($ mm)

$

23.8


$

44.3

(46) %


$

13.3

79 %


$

68.1


$

21.1

223 %

* Adjusted to include the royalty savings from the Ramaco Coal transaction for all periods.

Second Quarter 2022 Summary

In the following paragraphs, all references to "quarterly" periods or to "the quarter" refer to the second quarter of 2022, unless specified otherwise.

Year over Year Quarterly Comparison
Overall production in the quarter was 666,000 tons, up 16% from the same period of 2021. The Elk Creek complex produced 482,000 tons. Production from the Berwind and Knox Creek Mining complexes increased from 24,000 tons in 2021 to 184,000 tons this quarter. Overall total sales were 584,000 tons, down from 686,000 tons in the second quarter of 2021. The decline was largely attributable to continued slow rail service. This logistical constraint contributed to an inventory build of almost 90,000 tons during this quarter, and a total inventory build of over 180,000 tons for the first half of 2022.

Cash margins on Company produced coal were $109 per ton during the quarter, up over 275% from the same period of 2021. Quarterly pricing was $215 per ton of Company produced coal sold, which was almost 125% higher compared to the second quarter of 2021. Company produced cash mine costs during this quarter were $106 per ton. Quarterly cash mine costs per ton were 58% higher than for the same period of 2021. This increase in costs is principally attributed to higher sales-related costs, as well as inflationary impacts on overall costs. Cash mine costs at Elk Creek were $100 per ton during the quarter.

Despite current inflationary cost pressures, we are starting to see a decline in key raw material costs such as the price of diesel fuel and steel. We continue to anticipate a meaningful reduction in cash costs per ton in the second half of 2022. This projected decrease would be based upon factors including an increase in second half production over the first half, trucking savings from the commissioning of our Berwind Preparation Plant in the third quarter, and the full impact of royalty savings from the Ramaco Coal transaction.

Sequential Quarter Comparison
Overall production of 666,000 tons in the quarter was flat compared with the first quarter. Total sales volume of 584,000 tons for the quarter was roughly equal to the first quarter of 2022. Cash margins on Company produced coal were $109 per ton during the quarter compared to $133 per ton in the first quarter. The decline in margin was mainly due to lower realized pricing, with revenue per ton of $215 on company produced coal in the second quarter compared to $234 per ton in the first quarter of 2022.

We had previously noted that this quarter was expected to have lower revenue as it was the quarter with the heaviest volume of lower priced domestic sales. The level of that domestic volume however, constituted a higher than expected 80% of our overall coal sales due to the inventory build. Approximately 90,000 tons of the largely rail-related inventory build during the second quarter of 2022 had previously been earmarked for sale into the export market at higher prices. Importantly, we view this as deferred, not lost revenue. A significant portion of this unsold inventory has now been booked for sale in the second half of 2022 to a seaborne customer and priced against the seaborne thermal coal index for delivery.

Additional Financial Results

As of June 30, 2022, the Company had liquidity of $83.1 million, consisting of $43.5 million of cash on hand plus $39.6 million of availability under its revolving credit facility. Compared to March 31, 2022, accounts receivable and inventory increased meaningfully to $85.1 million, while accounts payable decreased to $34.4 million. The net balance sheet impact was a negative $24.0 million movement from March 31, 2022, to June 30, 2022.

Second quarter capital expenditures totaled $34.1 million. This was an increase of 73% versus $19.7 million for the first quarter of 2022 (excluding the Ramaco Coal acquisition). The increase was attributable to the continued development at the Berwind complex of both new mines and the preparation plant renovation, as well as the ongoing plant expansion of the Elk Creek complex.

The Company's effective quarterly tax rate was 22.8%, excluding discrete items. For the second quarter of 2022, we recognized income tax expense of $9.8 million, as compared with $0.2 million in the second quarter of 2021.

The following summarizes key sales, production and financial metrics for the periods noted:



















Three months ended


Six months ended June 30,



June 30,


March 31,


June 30,





In thousands, except per ton amounts


2022


2022


2021


2022


2021

















Sales Volume (tons)
















Company



578



573



664



1,151



1,071

Purchased



5



10



21



16



37

Total



584



583



686



1,167



1,108

















Company Production (tons)
















Elk Creek Mining Complex



482



503



550



985



1,061

Berwind Mining Complex (includes Knox Creek)



184



163



24



347



91

Total



666



666



574



1,332



1,152

















Company Produced Financial Metrics (a)
















Average revenue per ton


$

215


$

234


$

96


$

224


$

93

Average cash costs of coal sold*



106



101



67



104



63

Average cash margin per ton


$

109


$

133


$

29


$

120


$

30

















Elk Creek Financial Metrics (a)
















Average revenue per ton


$

208


$

236


$

95


$

221


$

92

Average cash costs of coal sold*



100



92



62



96



59

Average cash margin per ton


$

108


$

144


$

33


$

125


$