NACCO Industries, Inc. Q2 FY2025 earnings call

• J.C. Butler noted operational challenges in Utility Coal Mining and Contract Mining segments were temporary, but confidence in the business remains. - Reportable segments were renamed: Utility Coal Mining, Contract Mining, and Minerals and Royalties. - Mitigation Resources expected to achieve full-year profitability in 2026 instead of 2025 due to federal permitting delays. - Capital spending forecasted at up to $86 million for new business development, with most earmarked for growth initiatives.

Utility Coal Mining: Experienced revenue growth but faced operational challenges at Mississippi Lignite Mining Company due to customer power plant inefficiencies, affecting segment results. Contract Mining: Revenues net of reimbursed costs rose 3% due to part sales, but fewer tons delivered and higher costs offset this. Expect improvement in the back half of 2025. Minerals and Royalties: Excluding a large onetime gain, operating profit and EBITDA increased by 30% due to higher natural gas prices. Catapult's $4.2 million acquisition in July expanded the mineral interest portfolio.

• Utility Coal Mining expects improvement in the second half of 2025. - Contract Mining profits expected to strengthen in the back half of 2025 and continue into 2026. - Minerals and Royalties anticipate substantial increase in consolidated 2025 operating profit over the first half, but full year still below 2024 due to a large gain on sale in the prior year. - Plan to complete pension plan termination by end of 2025, resulting in a noncash settlement charge.

• Operational disruptions in Utility Coal Mining and Contract Mining segments impacted second quarter results. - Temporary federal permitting delays delayed Mitigation Resources' full-year profitability to 2026. - Pension settlement charge and lower operating profit expected to lead to substantial year-over-year decrease in net income and EBITDA compared to 2024 second half and full year.

Q: Starting with the coal segment, why were volumes lighter than in previous years?

A: It was a collection of minor issues in several places, nothing specific to call out, just single quarter noise.

Q: On MLMC returning to profit next year, what about gross profit?

A: Formula pricing expected to improve based on formula and inflation forecasts, with plant operations expected to be more consistent.

Q: For North American mining, why did volume drop off?

A: Combination of reduced customer demand, minor facility issues, and mechanical issues with equipment, but repairs made and no major problems expected going forward.

Q: Philosophically, where does NACCO want to be after CapEx cycle and cash flow changes?

A: Aiming for a bulletproof balance sheet with low debt and substantial cash, to ensure long-term relationships with customers.

Q: About the parts business in Contract Mining, is it a new business model?

A: Evolution of the business model, stocking parts to better serve customers, especially for hard-to-find components.

Q: Regarding Iger investment, what's the run rate earnings and capital allocation?

A: Iger is a non-op working interest investment, with optimism about its business model but no specific outlook provided.