Global metallurgical coal supplier and producer of metallurgical products for the steel industry Arch Resources Inc. (ARCH:NYSE ), today announced financial results for the first quarter of 2022 ended March 31, 2022.
The company indicated that for Q1/22 it posted total revenues of $867.9 million, compared to $357.5 million in Q1/21. Arch Resources explained that in Q1/22 sequential prices in its metallurgical segment increased nearly 30% and thermal segment prices were up over 20%.
The company's COO John T. Drexler noted, "During the first quarter, our core metallurgical segment executed effectively and well despite rail-related volume constraints, inflationary pressures and higher sales-sensitive costs…As a result, we were able to capitalize on historically strong coking coal pricing and deliver a record gross margin."
Arch Resources stated that it delivered record quarterly net income for the second straight quarter. The firm reported that during Q1/22 it posted net income of $271.9 million, or $12.89 per diluted share, versus a net loss of $6.0 million, or $0.40 per diluted share in Q1/21.
The company advised that it made great progress on execution of its strategic priorities and objectives. The firm noted that during Q1/22 it achieved a record gross margin in its core metallurgical segment, repaid $281.7 million of indebtedness and reached 80% ($100 million) of the targeted balance for its thermal mine reclamation fund.
The company highlighted that in accordance with the terms of its recently relaunched capital return program that provides for a return to shareholders of 50% of the preceding quarter's discretionary cash flow, it announced a second quarter dividend in the amount of $135.3 million, or $8.11 per share. Arch Resources explained that the dividend is comprised of a fixed amount of $0.25 per share plus a variable component of $7.86 per share and is payable on June 15, 2022, to stockholders of record as of May 31, 2022.
The company's CEO and President Paul A. Lang commented, "The Arch team executed at a high level during the first quarter, delivering record earnings despite significant rail-related challenges that constrained both coking and thermal coal shipments…Based on this strong first quarter performance, and in accordance with our new capital return formula, the board has declared a quarterly dividend of $135.3 million, or $8.11 per share, equivalent to 50 percent of Arch's first quarter discretionary cash flow."
"We view this substantial dividend – the first under our relaunched capital return program – as powerful evidence of Arch's extraordinary cash-generating potential, which in turn sets the stage for further significant payments in coming quarters," CEO Lang added.
Lang continued, "The board views our robust, multi-faceted capital return program as an appropriate way to reward stockholders for their steadfast support as we executed our strategic pivot towards steel and metallurgical markets and as we completed the buildout of Leer South…We view the new capital return model as balanced, durable and well-aligned with stockholder interests and preferences, and expect our capital return program to drive significant value for our stockholders going forward."
The company said that as of March 31, 2022, it held cash and cash equivalents of $318.7 million on its balance sheet and had total liquidity of $386.0 million. The firm stated that in Q1/22 it repaid $281.7 million of outstanding loans and ended the quarter with debt of only $322.8 million.
The company advised that it is continuing its efforts to accelerate the reclamation plan at its legacy thermal operations, while at the same time generating cash flow from those assets. The firm said that though it only invested around $4.0 million in capital in these operations, they contributed $100.5 million in segment-level adjusted EBITDA.
Arch's CFO Matthew C. Giljum remarked, "We are capitalizing on this period of historically strong thermal coal prices by pre-funding the long-term closure obligations of our legacy Powder River Basin operations…In doing so, we are setting the stage for strong, continued cash generation from these assets even as we move forward with winding them down in a careful and responsible manner."
The company indicated that the outlook for Q2/22 and FY/22 remains favorable. CEO Lang added, "Arch is exceptionally well-positioned to capitalize on constructive global coking coal market dynamics as the year progresses…We anticipate a significant increase in our financial results in the second quarter given the highly favorable pricing environment along with the anticipated step-up in coking coal volumes, and we also expect continuing strength in the year's second half as shipment levels normalize and as we have the opportunity to monetize our high coking coal inventories."
Arch Resources is headquartered in St. Lous, Mo. and is a producer of coal and metallurgical products for the global steel industry. The company claimed to be leading supplier of premium High-Vol A metallurgical "coking" coal globally. The firm operates four large metallurgical coal mines including its flagship Leer Mine in West Virginia and three thermal coal mines in Wyoming and Colorado.
Arch Resources started the day with a market cap of around $2.0 billion with approximately 15.48 million shares outstanding and a short interest of about 33.4%. ARCH shares opened nearly 8% higher today at $141.65 (+$10.33, +7.87%) over yesterday's $131.32 closing price. The stock has traded today between $136.00 and $160.10 per share and is currently trading at $159.31 (+$27.99, +21.31%).
| Want to be the first to know about interesting Coal investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Disclosures
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
