Warrior Met Coal posted record-high revenues in the fourth quarter and full-year 2018 based on strong steel demand and an increasing premium low-vol index price, company executives said on the Q4 earnings call late Thursday.
Last year "was a record year for global steel production with key regions like China and India displaying strong year-over-year growth while South America and Europe continued producing steel at high levels," CEO and director Walter Scheller said on the call.
"Although we've seen overall conditions [taper off] in early 2019 mainly due to concerns around the potential slowdown in certain major economies as well as the implicit uncertainty of the China-USA trade discussions and the [Lunar] New Year," Scheller added, "we anticipate another good year for steel production."
Net income for the producer totaled $374.2 million in Q4 and $696.8 million for the year, compared with $97.2 million for Q4 2017 and $455 million for 2017.
In Q4, Warrior produced 1.9 million st of met coal, up 20% from the year-ago quarter, and sold 2 million st in the quarter, up 45% year on year at an average price of $177.50/st, compared with $168.89/st.
"Our sales by geography in the quarter were 49% in Europe, 38% in South America and 13% in Asia," Scheller said. "The mix shift from Europe to South America was primarily driven by higher penetration with existing customers in addition to new customer sales."
"The Platts premium low-vol index price continued to rise on the back of strong fundamentals" in Q4, including the coal import restrictions in China in Q4, Scheller added. "Solid demand came from most major global regions, coupled with the supply chain that displayed tightness due to a continuation of logistical and production disruptions in Australia."
Annual production of 7.7 million st, up 15.2% from the year prior, exceeded 2018 company guidance of 7.1 million-7.5 million st. Sales during the year totaled 7.6 million st, up 17% from the prior year and a record high for the company. The average price on an annual basis was $175.74/st, up from $172.31/st in 2017.
Full-year demand showed itself to be "55% in Europe, 31% in South America and 14% in Asia," the CEO said.
MINING GROWTH
"Mine 7 reached a new milestone in its history, with record-high production of 5.6 million st in 2018, which is its best year since it began production in the 1970s," Scheller said, executives emphasized the company's Blue Creek mine project as the future of the company.
"We are extremely excited by the potential we see at Blue Creek," Scheller said, "and believe the project could become the cornerstone of our future portfolio" when development begins in 2020.
CONTINUED OPTIMISM WITH A CAUTIOUS APPROACH
"We're approaching 2019 with continued optimism," CFO Dale Boyles said on the call, "although with a cautious and conservative approach until further market economic information is available."
"As a result of strong production in 2018, we expect to complete two additional longwall moves for a total of five longwall moves in 2019 compared to the three moves we had in 2018," CFO Dale Boyles said. "Despite additional longwall moves, we are increasing the upper end of our guidance for coal production in coalfields for 2019 compared with guidance provided for 2018."
Warrior's 2019 guidance projects coal sales and production of 7.1 million-7.6 million st.
