Warrior Met Coal (NYSE:HCC) reported higher third-quarter revenue and profit as increased production from its Blue Creek mine and stronger steelmaking coal prices helped generate $139 million in free cash flow. The company also declared a $2-per-share special dividend in addition to its regular quarterly dividend.
Revenue rose to $508 million from $329 million a year earlier, while net income increased to $49 million, or $0.93 per diluted share, from $37 million, or $0.70 per share. Adjusted EBITDA rose 76% to $124 million.
CEO Walt Scheller said Blue Creek, which began longwall operations about a year ago and eight months ahead of schedule, is contributing to cash generation and supporting shareholder returns. The company reaffirmed its full-year 2026 guidance, though executives expect higher transportation, royalty and other costs to persist into the fourth quarter.
Blue Creek Boosts Volumes
Warrior sold 3.5 million short tons of coal in the third quarter, up 48% from a year earlier, primarily because of the Blue Creek ramp-up. Production increased 36% to 3.1 million short tons. High-Vol A coal accounted for 68% of sales volume, while Premium Low-Vol made up the remaining 32%.
The company used fixed-price contracts to sell about 550,000 tons of surplus High-Vol A inventory that accumulated after Blue Creek’s early start. Scheller said the transactions generated approximately $49 million in cash and helped normalize inventory, but reduced the quarter’s average net selling price by about $8 per ton.
Coal prices rose after the contracts were arranged. Scheller said adjusted EBITDA was approximately $27 million lower than it would have been had the surplus tons sold at Warrior’s average third-quarter High-Vol A price. Inventories fell to 967,000 short tons at the end of September from 1.4 million at the end of June.
Chief Financial Officer Dale Boyles said the company expects Blue Creek volumes to be higher in 2027 than in 2026, but it has not finalized a number. Scheller said Warrior is working through operational bottlenecks as it develops the mine’s first longwall.
Mine 7 and Logistics Pressures
Production at Mine 7 declined by 309,000 tons, or 22%, from the second quarter as the company completed a longwall move and encountered difficult geological conditions. Lower production raised overall cash costs by approximately $11 per ton compared with the prior quarter, Boyles said.
Scheller said Mine 7 was operating normally and he expected output to move closer to normal levels. Boyles cautioned that higher transportation and royalty costs and inflation would continue to affect expenses.
Cash cost of sales rose to $105 per short ton from $101 a year earlier. Higher transportation and royalty costs added about $6 per ton, while inflation added roughly $2 per ton. Lower-cost Blue Creek volumes offset approximately $8 per ton and a production tax credit provided another $3-per-ton benefit, Boyles said.
Warrior also faced higher freight and demurrage costs amid Middle East conflict and disruptions that included river lock repairs, Tropical Storm Bertha, a four-day power outage and terminal maintenance. Boyles said further planned outages and elevated rates are expected to keep those costs above normal through year-end and possibly longer.
Coal Prices and Capital Returns
Scheller said a supply-driven rally lifted coal prices during the quarter despite relatively weak spot demand. Chinese safety inspections and production restrictions reduced domestic coking coal availability, while a U.S. mine fire and reduced Mongolian border crossings added to supply constraints.
Warrior’s primary Premium Low-Vol Australia index averaged $225 per short ton in the third quarter, up from $216 in the second quarter and $166 a year earlier. Scheller expects prices to remain supported in the near term, though below their September peak, and said the market remains sensitive to Chinese government actions and weak Chinese steel demand.
Warrior ended the quarter with $437 million in cash and $141 million available under its asset-based lending facility. Boyles said the company expects to return excess cash to shareholders for now, while continuing to ramp up Blue Creek. A potential second longwall would depend in part on whether the market could absorb additional production.
Asked about share buybacks, Boyles said Warrior had not set a target stock price that would trigger action and would continue discussing capital allocation with its board.
About Warrior Met Coal (NYSE:HCC)
Warrior Met Coal, Inc is a mining company focused on the production and export of high-quality metallurgical coal, also known as met coal. Its products are used primarily by steelmakers in the blast-furnace steelmaking process, where metallurgical coal is converted into coke to support the production of iron and steel.
The company operates underground coal mines and related processing facilities in the Brookwood coal-producing region of Alabama. Warrior Met Coal primarily produces premium hard coking coal and sells its products to customers in international steel markets, serving regions that include Europe, Asia, and the Americas.
Warrior Met Coal was formed from the assets of Walter Energy after Walter Energy’s bankruptcy and began operating as an independent public company in 2016.
