Warrior Met Coal, Inc. (NYSE:HCC) Q3 2023 Earnings Conference Call November 1, 2023 4:30 PM ET

Company Participants

Walter Scheller - CEO & Director

Dale Boyles - CFO

Conference Call Participants

Lucas Pipes - B. Riley Securities

Operator

Good afternoon. My name is Allan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Third Quarter 2023 Financial Results Conference Call. [Operator Instructions]. This call is being recorded and will be available for replay on the company's website.

Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings.

I have also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's website at www.warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its website at www.warriormetcoal.com.

Here today to discuss the company's results are Mr. Walt Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Walter Scheller

Thanks, operator. Hello, everyone, and thank you for taking the time to join us today to discuss our third quarter 2023 results. After my remarks, Dale will review our results in additional detail then you'll have the opportunity to ask questions.

We were pleased to deliver another strong quarter in which we were able to leverage our operational excellence to achieve record sales volume, which represented a 51% increase over last year's third quarter. We continue to see improved performance from our transportation partners and at the McDuffie Terminal, which allowed us to ship more volume and reduce our excess inventory.

Our quarter-over-quarter growth in sales volume also yielded strong profitability as well, generating a cash margin of $158 million or $70 per short ton. Steel output from China, the world's largest producer, was stronger than we had anticipated, and it's widely [indiscernible] production cuts have not yet materialized. In fact, weaker domestic demand has led China to export higher-than-normal volumes of steel, which has impacted supply in some of our customers' markets.

With the exception of India, most other major steel-producing regions experienced lower demand and as a result, lower prices for their finished products. We've heard of customers adjusting their production rates to match demand. In contrast, the met coal index for premium low-vol coals experienced large upward trends during the latter part of the third quarter, while most other indices experienced more modest gains. These factors have put our customers' margins under pressure with the diverging steel prices in relation to raw material costs.