|RAMACO RESOURCES REPORTS FOURTH QUARTER AND FULL-YEAR 2022 RESULTS|
LEXINGTON, Ky., March 8, 2023 /PRNewswire/ -- Ramaco Resources, Inc. (NASDAQ: METC, "Ramaco" or the "Company"), a leading operator and developer of high-quality, low-cost metallurgical coal, today reported financial results for the three months and twelve months ended December 31, 2022.
FOURTH QUARTER 2022 HIGHLIGHTS
FULL-YEAR 2022 HIGHLIGHTS
MARKET COMMENTARY / 2023 OUTLOOK
For the three months ended December 31, 2022, the Company reported net income of $14.4 million, or $0.32 per diluted share. This compared to net income for the three months ended December 31, 2021, of $18.6 million, or $0.42 per diluted share. For the twelve-month period ended December 31, 2022, net income was $116.0 million or $2.60 per diluted share. This compared to net income of $39.8 million or $0.90 per diluted share for the twelve-month period ended December 31, 2021.
The Company's adjusted earnings before interest, taxes, depreciation, amortization, certain non-operating expenses, and equity-based compensation ("Adjusted EBITDA") was $31.9 million for the three months ended December 31, 2022. This compared to $31.6 million of Adjusted EBITDA for the three months ended December 31, 2021. Fourth quarter 2022 Adjusted EBITDA was negatively affected by roughly $4.4 million from idle costs at our Berwind mine related to the July ignition event. For the twelve-month period ended December 31, 2022, Adjusted EBITDA was $204.6 million, up from $79.0 million for the twelve-month period ended December 31, 2021. (See "Reconciliation of Non-GAAP Measure" below.)
Randall Atkins, Ramaco Resources' Chairman and Chief Executive Officer commented, "2022 was one of the most volatile market and logistical environments we have faced as a public company. Despite a major operational setback and continued transportation issues, we achieved a number of important milestones.
First, early 2022 marked the fifth-year anniversary of the first ton of coal that the Company ever produced. Last year we produced almost 2.7 million tons. Despite headwinds, we are also incredibly proud of the entire Ramaco team for successfully generating over $200 million of Adjusted EBITDA, having started from scratch just five years ago. I can think of no other U.S. publicly traded coal company that has been able to achieve that level of growth, in that short a time frame.
Second, it has been our goal since our IPO to generate increasing amounts of free cash flow which could ultimately be returned to our shareholders. We accomplished this goal in 2022. We initiated our inaugural regular base dividend, and then promptly doubled that amount. Recently, we again increased our dividend by a further 10%. For our long-term investors, we look forward to continuing regular increases over the coming years.
Third, we are extremely pleased that in a volatile environment our marketing team has been able to book significant new metallurgical sales. 75% of forecasted 2023 sales are now contracted, or approximately 2.6 million tons. Perhaps as important, approximately two thirds of total sales this year will be mostly index priced export business to take advantage of what we hope will be a strengthening market environment. 1.6 million tons, or 47% of our projected overall 2023 sales, will be fixed price business at $200 per ton. This solid book of contracted business will allow us the optionality to begin to tap new international markets, including current and pending test shipments to Asian customers. We have already made our first shipments this quarter into India.
Fourth, it is always gratifying to be able to give back to the communities in which we operate. In 2022, we created the Ramaco Foundation, which has already made multiple donations to partner with charitable organizations in West Virginia, Virginia, and Wyoming.
2022 was a record year, with almost 3 times greater Adjusted EBITDA than 2021. With that said, as we have rapidly grown, we have also encountered a number of unforeseen headwinds.
First, we had the unfortunate ignition at Berwind in July. This cost us several hundred thousand tons of projected production in 2022 and with it substantial expected earnings. We are pleased to report that the mine returned to operations last week, and we expect it will hit full production from the first section by the third quarter of 2023. Our investigation of the cause of the accident concluded that the ignition source was external to the mine. It was most likely a lightning strike while the mine was idle for scheduled ventilation fan maintenance. This was consistent with conclusions of both the Mine Safety and Health Administration and the West Virginia Office of Miners' Health Safety and Training.
Second, last July we signed a ~250,000 ton indexed priced deal with a European utility. At the time of the contract, the API2 index was priced around $400 per ton. Unfortunately, the API2 index moved against us and our realized pricing dropped by almost two-thirds over the course of the contract.
Lastly, we now estimate that last year rail and logistics issues negatively impacted our earnings each quarter by an average of $14 million of Adjusted EBITDA or $11 million of net income. Naturally, bottlenecks always seemed to happen around the end of a quarter. We are hopeful that, based on operational changes at our railroad partners, logistics will return to a more normalized cadence in the coming year.
Despite these past issues, 2023 is poised to be a transformational positive year for Ramaco. The met coal markets and pricing have strengthened in the early part of this year. We also have several impactful developments which will begin to increase production and earnings starting in the second quarter and building throughout the year. These are the 1-million-ton expansion of increased production and processing capacity at the Elk Creek plant, the "re-opening" of the Berwind mine, with its ultimate potential 1.5 million ton per year production level, and the initiation of production at the new Maben mine with production building to roughly 250,000 tons per year.
In 2023 we anticipate an ~825,000 ton increase in production over 2022 at the high end of guidance. We expect a corresponding increase in sales enhanced by the approximately 150,000 of carryover tons we were unable to ship for weather and rail issues by year end 2022. Indeed, by the third quarter, because of the quarterly increase in production cadence, we expect to be producing at an annualized four million ton per year run rate. On our financial metrics, we also hope to achieve a 5% decrease in our cash mine costs, as well as a significant 43% decrease in capital expenditures versus 2022 levels.
We hope the cumulative results of this progress in 2023 translates into another record year of net income, Adjusted EBITDA and free cash flow. Over the past eighteen months, we made three accretive reserve, royalty and infrastructure acquisitions. At this point, we do not contemplate further acquisitions in order to reach our optimal level of 6.5 million tons of production over the next few years.
Our goal for 2023 is simply to execute. We plan to both meaningfully increase production and processing capacity. We also expect to pay down the majority of our remaining debt in order to maintain our strong balance sheet. Lastly, we will continue to pursue our dual longer-term objectives of combining an increase in profitable production with a steady growth in return of capital to our shareholders."
Key operational and financial metrics are presented below:
FOURTH QUARTER 2022 PERFORMANCE
In the following paragraphs, all references to "quarterly" periods or to "the quarter" refer to the fourth quarter of 2022, unless specified otherwise.
Year over Year Quarterly Comparison
Overall production in the quarter was 695,000 tons, up 34% from the same period of 2021. The Elk Creek complex produced 537,000 tons. Production from the Berwind and Knox Creek Mining complexes increased from 109,000 tons in the fourth quarter of 2021 to 158,000 tons this quarter. Overall total sales were close to a quarterly record of 675,000 tons, up from 535,000 tons in the fourth quarter of 2021.
Cash margins on Company produced coal were $68 per ton during the quarter, up 3% from the same period of 2021. Quarterly pricing was $182 per ton of Company produced coal sold, which was 27% higher compared to the fourth quarter of 2021, based on non-GAAP revenue and cash cost per ton.
Company produced cash mine costs were $114 per ton. Quarterly cash mine costs per ton were 48% 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 $101 per ton during the quarter. Mine cash costs were also negatively impacted by higher startup costs as production was ramped up at several new mines at our Berwind and Knox Creek complexes. In the first quarter of 2023, cash costs have decreased to a more normalized range, with overall 2023 production tracking budget.
Fourth quarter results were negatively impacted by continued logistics and rail challenges as well as a large drop in realized pricing on a sales contract priced against the API2 index. Specifically, approximately 150,000 tons for delivery in December were pushed into January 2023 due to negative rail performance, railcar unloading and port performance caused in part by extreme cold temperatures in December. Additionally, Company earnings were negatively impacted by the 50% drop during December in API2 index pricing on a large seaborne met coal sale for thermal use into Europe. After January 2023, the Company had no outstanding commitments to sell API2 linked coal to thermal markets in Europe.
Sequential Fourth Quarter Comparison
Fourth quarter overall production of 695,000 tons was up 37,000 tons compared with the third quarter, as new mines ramped up production at our Berwind and Knox Creek complexes. Total sales volume of 675,000 tons was up 11% from the third quarter 2022 level of 608,000 tons.
Cash margins on Company produced coal were $68 per ton compared to $104 per ton in the third quarter. The decline in margin was mainly due to lower realized pricing, with fourth quarter revenue of $182 per ton on company produced coal compared to $202 per ton in the third quarter. This pricing drop was largely due to the previously mentioned impact of the fall in API2 index prices. In addition, as a result of new mine startups at our Berwind and Knox Creek complexes, cash costs per ton sold increased to $114 in the fourth quarter compared to $98 in the third quarter. As these mines ramp up production over the coming quarters in 2023, we anticipate that these mine costs will fall from current levels.
BALANCE SHEET AND LIQUIDITY
As of December 31, 2022, the Company had liquidity of $49.1 million, consisting of $35.6 million of cash plus $13.5 million of availability under our revolving credit facility. As noted, our revolving credit facility was increased from $40 million to $175 million as of February 2023. This facility now consists of an aggregate revolving commitment of $125 million together with an accordion feature for an additional $50 million, subject to the terms and conditions of the facility. As of February 28, 2023, the Company had total liquidity of $74.0 million.
Compared to December 31, 2021, inventory increased from $15.8 million to $45.0 million. A portion of the increase was attributable to the failure to ship inventory on a timely basis through logistical and rail challenges throughout the calendar year. We expect a meaningful decline in inventory from sales of 2022 carryover tonnage and the 50% increase in processing capacity once the Elk Creek preparation plant comes online in the second quarter of 2023.
Fourth quarter capital expenditures totaled $31.6 million. This was a decrease of 16% versus $37.6 million for the third quarter of 2022. The decrease was attributable to the completion of the renovation at the Berwind complex preparation plant in the fourth quarter of 2022. The Company's full-year 2022 overall capital expenditures were $123.0 million, over 75% of which related to its ongoing growth projects.
The Company's effective quarterly tax rate was 22%, excluding discrete items. For the fourth quarter of 2022, we recognized income tax expense of $3.1 million, as compared with $6.6 million in the third quarter of 2022.
The following summarizes key sales, production and financial metrics for the periods noted:
ABOUT RAMACO RESOURCES
Ramaco Resources, Inc. is an operator and developer of high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. Its executive offices are in Lexington, Kentucky, with operational offices in Charleston, West Virginia and Sheridan, Wyoming. The Company currently has three active mining complexes in Central Appalachia and one mine not yet in production near Sheridan, Wyoming. Contiguous to the Wyoming mine, the Company operates a research and pilot facility related to the production of advanced carbon products and materials from coal. In connection with these activities, it holds a body of roughly 50 intellectual property patents, pending applications, exclusive licensing agreements and various trademarks. News and additional information about Ramaco Resources, including filings with the Securities and Exchange Commission, are available at https://www.ramacoresources.com. For more information, contact investor relations at (859) 244-7455.
FOURTH QUARTER AND FULL-YEAR 2022 CONFERENCE CALL
Ramaco Resources will hold its quarterly conference call and webcast at 9:00 AM Eastern Time (ET) on Thursday, March 9, 2023. An accompanying slide deck will be available at https://www.ramacoresources.com/investors-center/events-calendar/ immediately before the conference call.
To participate in the live teleconference on March 9, 2023:
Domestic Live: (833) 816-1381
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Ramaco Resources' expectations or beliefs concerning guidance, future events, anticipated revenue, future demand and production levels, macroeconomic trends, the development of ongoing projects, costs and expectations regarding operating results, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco Resources' control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. These factors include, without limitation, risks related to the impact of the COVID-19 global pandemic, unexpected delays in our current mine development activities, the ability to successfully ramp up production at the Berwind and Know Creek complexes, the timing of the Elk Creek preparation plant to come online, failure of our sales commitment counterparties to perform, increased government regulation of coal in the United States or internationally, the further decline of demand for coal in export markets and underperformance of the railroads, the expected benefits of the Ramaco Coal and Maben acquisitions to the Company's shareholders, and the anticipated benefits and impacts of the Ramaco Coal and Maben acquisitions. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Ramaco Resources does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Ramaco Resources to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in Ramaco Resources' filings with the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The risk factors and other factors noted in Ramaco Resources' SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.
Reconciliation of Non-GAAP Measures
Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.
We define Adjusted EBITDA as net income plus net interest expense; equity-based compensation; depreciation, depletion, and amortization expenses; income taxes; certain non-operating expenses (charitable contributions), and accretion of asset retirement obligations. Its most comparable GAAP measure is net income. A reconciliation of net income to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as a substitute for GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.
Non-GAAP revenue and cash cost per ton
Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue less transportation costs, divided by tons sold. Non-GAAP cash cost per ton sold is calculated as cash cost of coal sales less transportation costs and idle mine costs, divided by tons sold. We believe revenue per ton (FOB mine) and cash cost per ton provides useful information to investors as these enable investors to compare revenue per ton and cash cost per ton for the Company against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices and costs from period to period excluding the impact of transportation costs, which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing the Company's financial performance. Revenue per ton sold (FOB mine) and cash cost per ton are not measures of financial performance in accordance with GAAP and therefore should not be considered as a substitute to revenue and cost of sales under GAAP. The tables below show how we calculate non-GAAP revenue and cash cost per ton:
Non-GAAP revenue per ton
We do not provide reconciliations of our outlook for cash cost per ton to cost of sales in reliance on the unreasonable efforts exception provided for under Item 10(e)(1)(i)(B) of Regulation S-K. We are unable, without unreasonable efforts, to forecast certain items required to develop the meaningful comparable GAAP cost of sales. These items typically include non-cash asset retirement obligation accretion expenses, mine idling expenses and other non-recurring indirect mining expenses that are difficult to predict in advance in order to include a GAAP estimate.
SOURCE Ramaco Resources, Inc.
|3/8/2023 4:33:00 PM