Alpha Metallurgical Resources, Inc. (NYSE: AMR)

Alpha Metallurgical Resources reported a net loss of $33.9 million ($2.60 per diluted share) for the first quarter of 2025, a significant decline from the net income of $127.0 million ($9.59 per diluted share) in the comparable period of 2024. This represents a 127% year-over-year decrease, primarily driven by lower sales volumes, reduced coal pricing, and operational challenges related to severe weather conditions in January and February.

Adjusted EBITDA for Q1 2025 was $5.7 million, down 97% from $189.6 million in Q1 2024 and 89% from $53.2 million in Q4 2024. This sharp decline reflects the challenging market environment and operational disruptions experienced during the quarter. While the company maintained positive Adjusted EBITDA, the magnitude of the decline highlights the significant headwinds faced by Alpha in the current market.

Coal revenues for Q1 2025 were $529.7 million, compared to $861.3 million in Q1 2024, a 38% year-over-year decrease. On a non-GAAP basis, excluding freight and handling fulfillment revenues, coal revenues were $445.7 million, with a coal sales realization of $118.61 per ton, down from $166.68 per ton in Q1 2024. This decline in realizations was driven by the continued deterioration of metallurgical coal indices throughout the quarter.

The company's cost of coal sales increased to $110.34 per ton in Q1 2025 compared to $108.82 per ton in Q4 2024. This increase was primarily driven by the severe weather in January and February, which disrupted operations and resulted in higher costs. Management noted that cost of coal sales improved in March once these external challenges abated.

Despite the challenging quarter, Alpha generated operating cash flow of $22.2 million, although this represents a 89% decrease from the $196.1 million generated in Q1 2024. Capital expenditures for Q1 2025 were $38.5 million, down 40% from $63.6 million in the prior year period, reflecting the company's focus on capital discipline in response to the current market conditions.

Alpha's Met segment sold 3.8 million tons of coal in Q1 2025, a decrease from 4.1 million tons in Q4 2024 and 4.4 million tons in Q1 2024. This reduction in sales volume reflects both operational challenges related to severe weather and the company's strategic response to declining market prices. Of the total volume, 3.5 million tons were metallurgical coal and 0.3 million tons were thermal coal.

The company's net realized pricing for the Met segment was $118.61 per ton in Q1 2025, compared to $127.84 per ton in Q4 2024 and $166.68 per ton in Q1 2024. This quarter-over-quarter decrease in realizations was driven by further deterioration of metallurgical coal indices. Domestic sales achieved significantly higher realizations at $155.54 per ton, while export sales based on Australian indices realized the lowest pricing at $107.44 per ton.

The breakdown of Alpha's metallurgical coal sales in Q1 2025 shows that 48% of met coal tons were sold as export with Australian index-based pricing, while 29% were export sales with other pricing mechanisms and 23% were domestic sales. This sales mix, combined with the decline in global benchmark prices, contributed to the overall decrease in average realizations compared to previous quarters.

Market conditions for metallurgical coal remained challenging throughout Q1 2025, with pricing pressure continuing across most export markets. The company noted ongoing weakness in global steel production and inventory management by customers as factors contributing to the softer demand environment. The domestic market provided some relative pricing strength, as evidenced by the significantly higher realizations for domestic sales compared to export sales.

Looking ahead to the remainder of 2025, as of May 1, 2025, Alpha has committed and priced approximately 50% of its metallurgical coal for 2025 at an average price of $133.04 per ton, and 100% of its thermal coal at an average price of $80.75 per ton. The committed but unpriced portion represents 45% of expected metallurgical coal sales for the year, indicating some potential upside opportunity should market conditions improve in the coming quarters.

As of March 31, 2025, Alpha maintained a strong liquidity position of $485.8 million, consisting of cash and cash equivalents of $448.0 million and $112.9 million of unused availability under the asset-based revolving credit facility (ABL), partially offset by a minimum required liquidity of $75.0 million as required by the ABL. This represents a solid financial foundation despite the challenging market conditions, providing Alpha with flexibility to navigate the current environment.

A significant development during the quarter was the amendment and extension of the company's ABL facility. On May 6, 2025, Alpha successfully increased the size of its ABL from $155 million to $225 million and extended the maturity date to May 4, 2029. The company may also request an additional increase of up to $75.0 million, with $25.0 million solely for additional availability to obtain cash collateralized letters of credit.

Key terms of the amended ABL facility include:

• Letters of credit fees calculated at a rate of 2.25%, 2.50%, or 2.75% depending on available capacity
• Interest on Term SOFR Loans at Term SOFR + 0.10% SOFR Adjustment + applicable rate of 2.25%-2.75%
• Interest on Base Rate Loans at Base Rate + applicable margin of 1.25%-1.75%
• Commitment fee of 0.375% on unused capacity
• Minimum liquidity requirement of $75.0 million
• Restriction on certain payments (including dividends and share repurchases) if cash at Regions Bank falls below $100.0 million

The ABL facility provides important financial flexibility for Alpha, enhancing its ability to manage through the current market downturn while maintaining adequate liquidity for operations and strategic investments. As of March 31, 2025, the company had no borrowings and $42.1 million in letters of credit outstanding under the ABL, with total long-term debt, including the current portion, at just $5.0 million.

Cash provided by operating activities in Q1 2025 decreased to $22.2 million, compared to $56.3 million in Q4 2024 and $196.1 million in Q1 2024. This reduction reflects the impact of lower coal prices and sales volumes on the company's cash generation. Capital expenditures for Q1 2025 were $38.5 million, down from $42.7 million in Q4 2024 and $63.6 million in Q1 2024, demonstrating the company's disciplined approach to capital allocation in the current environment.

In response to market conditions and economic uncertainty, Alpha has reduced its 2025 capital expenditure guidance to $130-150 million, down from the previous range of $152-182 million. Management indicated that this reduction (approximately $27 million at the midpoint) is achievable without any negative impact to safety or the progress of development mining at the new Kingston Wildcat low vol mine.

Alpha faced significant operational challenges in Q1 2025, primarily driven by severe weather conditions in January and February that disrupted production and increased costs. Despite these headwinds, the company maintained operational discipline and implemented strategic initiatives to navigate the difficult market environment.

Operational Highlights

• Production Efficiency: Management noted that operational performance improved significantly in March once weather-related challenges abated, indicating that the underlying operational efficiency of Alpha's assets remains strong when not impacted by external factors.
• Cost Management: Despite cost pressures in January and February, the company's focus on cost discipline kept the overall increase in cost of coal sales to 1.4% quarter-over-quarter ($110.34 per ton in Q1 2025 vs. $108.82 in Q4 2024).
• Capital Discipline: Capital expenditures decreased to $38.5 million in Q1 2025 from $42.7 million in Q4 2024 and $63.6 million in Q1 2024, reflecting Alpha's responsive approach to capital allocation in the face of market headwinds.

Strategic Initiatives

Alpha's strategic focus in the current challenging environment centers around three key areas:

• Liquidity Preservation: In response to poor market conditions and economic uncertainty caused by shifting tariff and trade policies, Alpha has prioritized the protection of its liquidity position. The successful amendment and extension of the ABL facility provides enhanced liquidity options, while the reduction in capital expenditure guidance demonstrates the company's commitment to preserving financial flexibility.
• Focused Capital Investment: Despite reducing overall capital spending, Alpha continues to invest strategically in high-value initiatives. Management specifically highlighted that the development of the new Kingston Wildcat low vol mine remains on track, indicating the prioritization of projects that will enhance the company's product mix and competitive position in the future.
• Operational Optimization: With the challenging pricing environment, Alpha is focusing on operational efficiencies to maintain margins. The company's ability to rapidly improve operational performance in March, following weather-related disruptions, demonstrates its operational agility and focus on cost management.

The company's annual meeting of stockholders was held on May 7, 2025, during which stockholders re-elected all six members of Alpha's board of directors to additional one-year terms and approved all other items proposed by the board for consideration at the meeting.

Looking ahead, Alpha's strategic approach remains centered on maintaining operational flexibility, preserving liquidity, and positioning the company to capitalize on market recovery when conditions improve. The reduced capital expenditure plan for 2025 reflects a balanced approach that maintains safety standards and key development projects while conserving cash in the current uncertain environment.

In response to the challenging market conditions and operational challenges experienced in Q1 2025, Alpha has updated its guidance for the full year 2025:

Updated 2025 Shipment Guidance

• Metallurgical coal shipments reduced to 13.8-14.8 million tons, down from the previous range of 14.5-15.5 million tons
• Thermal coal shipments reduced to 0.8-1.2 million tons, down from the prior range of 1.0-1.4 million tons
• Total shipments now expected to be 14.6-16.0 million tons for 2025, compared to the previous range of 15.5-16.9 million tons

Sales Commitments and Pricing

As of May 1, 2025, Alpha has made significant progress in securing sales commitments for 2025:

• Metallurgical Coal: 50% committed and priced at an average of $133.04 per ton
  • Domestic: Priced at $152.05 per ton
  • Export: Priced at $113.29 per ton
• Thermal Coal: 100% committed and priced at an average of $80.75 per ton
• Overall Met Segment: 55% committed with 42% committed but unpriced, providing some potential upside should market conditions improve

Other Financial Guidance

• Capital Expenditures: Reduced to $130-150 million, down $27 million at the midpoint from the previous range of $152-182 million
• Met Segment Costs: Maintained at $103.00-$110.00 per ton
• SG&A: $53-59 million (excluding non-cash stock compensation and non-recurring expenses)
• Idle Operations Expense: $18-28 million
• Net Cash Interest Income: $2-10 million
• DD&A: $165-185 million
• Capital Contributions to Equity Affiliates: $44-54 million

Market Outlook

Alpha's management commentary indicated continuing headwinds in the metallurgical coal market, with references to "poor market conditions and economic uncertainty caused by shifting tariff and trade policies." These factors have contributed to the company's conservative approach to guidance and capital allocation for the remainder of 2025.

The significant spread between domestic and export pricing ($152.05 vs. $113.29 per ton) reflects divergent market conditions across regions, with domestic U.S. steel producers offering more favorable terms compared to export markets tied to Australian indices. This pricing dynamic is likely to influence Alpha's sales strategy as it navigates the remainder of 2025.

While the company did not provide specific commentary on potential market recovery timing, the fact that 45% of expected metallurgical coal volumes remain committed but unpriced suggests Alpha is maintaining some exposure to potential price improvements in the second half of the year. However, the overall cautious tone of management and the reduction in volume guidance indicate a measured outlook for the near term.