Market Overview

NACCO Industries, Inc. Announces Second Quarter 2019 Results

Share:

CLEVELAND, July 31, 2019 /PRNewswire/ --

Quarter Highlights:

  • Consolidated operating profit increased 17.4% over Q2 2018
  • Consolidated net income increased 24.7% over Q2 2018
  • Diluted earnings per share increased to $1.14/share from $0.92/share in Q2 2018

NACCO Industries, Inc. (NYSE:NC) today announced consolidated net income of $8.0 million, or $1.14 per diluted share, and consolidated revenues of $41.4 million for the second quarter of 2019, compared with consolidated net income of $6.4 million, or $0.92 per diluted share, and consolidated revenues of $33.7 million for the second quarter of 2018.  The increase in net income was primarily due to an increase in earnings at the Minerals Management segment and a reduction in unallocated expenses from lower professional fees partially offset by a decrease in earnings at the Coal Mining and North American Mining segments.

For the six months ended June 30, 2019, the Company reported consolidated net income of $23.0 million, or $3.29 per diluted share, and consolidated revenues of $81.4 million, compared with consolidated net income of $14.6 million, or $2.10 per diluted share, and consolidated revenues of $64.9 million for the first six months of 2018. NACCO's effective income tax rate was 15.2% for the six months ended June 30, 2019, compared with 12.0% for the six months ended June 30, 2018.

NACCO ended the second quarter of 2019 with consolidated cash on hand of $98.4 million and debt of $12.0 million.  At December 31, 2018, NACCO had consolidated cash on hand of $85.3 million and debt of $11.0 million.

In February 2018, NACCO's Board of Directors authorized a stock buyback program to purchase up to $25 million of the Company's outstanding Class A common stock through December 31, 2019.  The Company has repurchased approximately 78,000 shares for an aggregate purchase price of $2.7 million since inception of this program, including $0.1 million of stock purchased during the three months ended June 30, 2019.

In the first quarter of 2019, the Company changed its segment reporting.  The 2018 financial information in this release has been recast to reflect the new segments.  In addition, recast quarterly segment information for the third and fourth quarters of 2018 has been included on page 10.

Detailed Discussion of Results

Coal Mining Results

Coal deliveries for the second quarter of 2019 and 2018 were as follows:



2019


2018

Tons of coal delivered


(in millions)

        Unconsolidated operations


6.9


8.0

        Consolidated operations


0.9


0.8

                        Total deliveries


7.8


8.8


Key financial results for the second quarter of 2019 and 2018 were as follows:


2019


2018


(in thousands)

Revenues

$

22,570


$

20,860

Earnings of unconsolidated operations

$

13,529


$

15,333

Operating expenses(1)

$

10,152


$

8,227

Operating profit

$

4,693


$

7,898



(1)

Operating expenses consist of Selling, general and administrative expenses, Amortization of intangible assets and Gain on sale of assets.

Coal Mining revenues increased moderately in the second quarter of 2019, primarily due to an increase in tons delivered at Mississippi Lignite Mining Company as a result of higher customer requirements.

Second-quarter 2019 operating profit decreased mainly due to higher operating expenses primarily attributable to an increase in, and the timing of, employee-related costs and a decrease in earnings of unconsolidated operations. Fewer coal tons delivered as a result of customer plant outages contributed to the decrease in earnings of unconsolidated operations. These unfavorable items were partially offset by improved results at the consolidated operations.  The improvement at the consolidated operations was primarily due to an increase in customer requirements and a reduction in cost per ton sold at Mississippi Lignite Mining Company. In addition, the transfer of certain Centennial mine permits to third parties resulted in a $0.4 million loss, and allowed for a $5.4 million reduction to Centennial's mine reclamation obligation.

Coal Mining Outlook

In the second half and for the full year of 2019, the Company expects coal deliveries to decrease compared with the respective prior year periods. The expected reduction in coal deliveries is a result of changes in customer requirements, including the timing and duration of power plant outages, as well as comparisons to historically high delivery levels at certain of the unconsolidated operations in the prior year.

Revenues in the second half of 2019 are expected to decrease primarily as a result of the absence of a favorable $3.0 million contractual settlement recognized at Mississippi Lignite Mining Company in the fourth quarter of 2018. Excluding the contractual settlement, revenues in the second half and full year of 2019 are expected to decrease modestly compared with the comparable 2018 periods due to the change in customer requirements.

Excluding the $3.0 million contractual settlement, as well as $1.8 million of favorable adjustments recognized in the fourth quarter of 2018 related to a reduction in Centennial's mine reclamation liabilities, operating profit in the second half of 2019 is expected to increase compared with the second half of 2018 primarily as a result of a reduction in operating expenses and improved results at the consolidated mining operations.  These favorable changes are expected to be partially offset by reduced income at the unconsolidated Coal Mining operations as customer requirements are expected to be reduced from the prior year.  The reduction in operating expenses is primarily due to a shift in the timing of costs between quarters.  Full-year 2019 operating expenses are expected to be comparable to 2018.

Excluding the favorable 2018 items noted above and an additional $1.0 million favorable mine reclamation liability adjustment recognized in the first quarter of 2018, full-year 2019 operating profit is expected to decrease modestly compared with full-year 2018 as reduced income at the unconsolidated Coal Mining operations, due to fewer tons delivered, is expected to be partially offset by improved results at the consolidated mining operations.

North American Mining Results

Limestone deliveries for the second quarter of 2019 and 2018 were as follows:



2019


2018



(in millions)

Tons of limestone delivered


11.8


11.0







Key financial results for the second quarter of 2019 and 2018 were as follows:


2019


2018


(in thousands)

Revenues

$

10,728


$

9,067

Operating (loss) profit

$

(483)


$

157

Revenues increased in the second quarter of 2019 due to higher reimbursed costs. Reimbursed costs have an offsetting amount in cost of goods sold and have no impact on operating profit.

North American Mining reported an operating loss of $0.5 million during the second quarter of 2019 compared with operating profit of $0.2 million during the second quarter of 2018. The 2019 second quarter loss included higher employee-related and business development costs, as well as an increase in supplies and repairs and maintenance expenses.  These additional costs were partially offset by an improvement in earnings attributable to a new customer contract.

North American Mining Outlook

North American Mining expects operating profit in the second half of 2019 to improve over the first half of the year, and be comparable to the second half of 2018.  Operating profit for the remainder of 2019 is expected to benefit from an increase in earnings associated with new contracts, which are anticipated to be partly offset by continued spending on business development activities and increased employee-related expenses.  As a result of the operating loss in the first half of 2019, North American Mining expects full-year 2019 operating profit to be significantly lower than 2018.

North American Mining will continue to incur expenses to support business development activities, which will contribute to an increase in operating expenses in 2019 over 2018.  Over the longer term, the Company expects operating profit to improve as the business expands and is able to capture economies of scale made available through recent and ongoing investments in people, systems and infrastructure to support continued growth.  North American Mining entered into two new contracts during the second quarter of 2019.  These new contracts, which are expected to commence in the third quarter, will have a modest impact on earnings in the second half of 2019 and will c

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com