Warrior Met Coal, Inc. (NYSE: HCC)
Q1 2025 Financial Analysis | April 30, 2025
Executive Summary
Warrior Met Coal reported challenging Q1 2025 results impacted by lower coal pricing, with revenue decreasing 40% to $299.9 million and recording a net loss of $8.2 million compared to $137.0 million net income in Q1 2024. Despite these headwinds, the company maintained strong cost control with cash costs improving 16% to $112.35 per short ton.
Q1 2025 Highlights
Financial Performance
Warrior Met Coal faced a challenging pricing environment in Q1 2025, with revenue plummeting 40% to $299.9 million. The primary driver was a significant 42% decline in average net selling price to $135.79 per short ton, impacted by the Platts Premium LV FOB Australia index declining 9% versus Q4 2024 and 40% versus Q1 2024.
Despite the revenue decline, the company demonstrated operational excellence by increasing production 10% to 2,254 thousand short tons, entirely attributable to Blue Creek's production. Cash cost of sales improved impressively by 16% to $112.35 per short ton, showing cost discipline in a difficult market.
The company reported a net loss of $8.2 million compared to net income of $137.0 million in Q1 2024. Adjusted EBITDA declined 80% to $39.5 million, while free cash flow was negative at $68.4 million, primarily due to continued capital expenditures on the Blue Creek development project.
Blue Creek Project Update
Transformational Blue Creek Development
The Blue Creek project remains on track with significant progress achieved in Q1 2025:
- 251 thousand short tons produced from three continuous miners
- Total project capital expenditure of $772 million spent through Q1 2025
- Overall capital expenditure estimate maintained at $995M to $1.075B
- Longwall startup expected no later than Q2 2026
- Preparation plant projected to start mid-2025
The Blue Creek project represents a transformational opportunity for Warrior Met Coal, offering 6.0 million tons annual capacity of premium High Vol A steelmaking coal with strong coking properties. The project is advancing on schedule and on budget despite inflationary pressures.
Key milestones include successful continuous miner development starting in Q3 2024, with the preparation plant expected to begin operations in mid-2025. The longwall mining system, which will drive majority production, is on track for startup no later than Q2 2026.
The project scope was expanded in 2023 by an additional $130 million to dramatically improve the transportation plan, adding overland belt and rail loadout facilities that de-risk the ability to deliver product to the Port of Mobile via multiple channels.
Financial Position & Outlook
Strong Liquidity
2025 Guidance
Warrior Met Coal maintains a strong financial position with $616.6 million in total liquidity, including $454.9 million in cash and cash equivalents. The company's balance sheet strength supports continued development of the Blue Creek project while maintaining operational flexibility.
Despite the negative free cash flow in Q1 2025, the company's consolidated net leverage ratio stands at negative 1.15x, indicating more cash than debt on an adjusted basis. Management maintained their quarterly dividend at $0.08 per share, demonstrating confidence in the business outlook.
The company reiterated its 2025 guidance with coal sales expected at 8.2-9.0 million tons and Blue Creek capital expenditures estimated at $225-$250 million. Cash cost of sales guidance remains at $117-$127 per short ton on a free-on-board port basis.
Conclusion
Strengths
- Production increased 10% to 2,254 thousand tons
- Cash cost improved 16% despite pricing pressures
- Blue Creek project on schedule and on budget
- Strong liquidity of $616.6 million
- Maintained shareholder returns with dividend
Focus Areas
- Managing through low pricing environment
- Executing Blue Creek ramp-up successfully
- Maintaining cost discipline across operations
- Preserving financial flexibility during development
- Positioning for market recovery
Summary
Warrior Met Coal delivered challenging Q1 2025 results reflecting the difficult pricing environment, with revenue down 40% and a net loss of $8.2 million. However, the company demonstrated operational strength through a 10% increase in production and significant 16% reduction in cash costs.
The transformational Blue Creek project remains the key strategic initiative, progressing on schedule and on budget. With 251 thousand tons produced in Q1 and longwall startup expected by Q2 2026, Blue Creek is positioned to significantly expand Warrior's capacity and enhance its product mix.
Warrior Met Coal's strong financial position, with $616.6 million in liquidity and negative net leverage, provides the resources to complete Blue Creek development and weather the current market challenges. Once fully operational, Blue Creek is expected to increase nameplate capacity to 14 million tons annually, positioning Warrior as a leading provider of premium steelmaking coal.
