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CE

CONSOL Energy Inc. (CEIX)·Q3 2024 Earnings Summary

Executive Summary

  • Strong operational and financial execution despite planned longwall move and lingering Port of Baltimore effects: net income $96M, $3.22 diluted EPS, adjusted EBITDA $179M, and free cash flow $122M, with record Q3 sales/production at PAMC and lowest cash cost/ton since Q1 2023 .
  • Mix optimization and export pivot: average coal revenue/ton $64.28 on 6.8M tons sold, with 1.1M tons shifted into crossover met markets—highest quarterly level ever—supporting realizations and volumes .
  • Guidance tightened/raised for FY24: PMC price/ton range to $64.50–$66.00, PMC cash cost/ton lowered to $37.50–$38.50, and PMC sales volume raised to 25–26M tons; Itmann sales lowered to 0.6–0.8M tons .
  • Potential catalysts: business interruption insurance claim submitted (~$60M+), continued 2025 contracting progress (now ~18M tons; average price modeled low-$60s at $115 API2), and merger progress with Arch Resources; all antitrust regulatory conditions satisfied and Q1’25 closing anticipated .

What Went Well and What Went Wrong

What Went Well

  • Record third-quarter performance at PAMC with highest ever Q3 sales/production and lowest cash cost/ton since Q1 2023; “a testament to the resiliency of our operations and desirability of our product” .
  • Strategic market optionality: 1.1M tons shipped into crossover met markets—“by far our highest ever quarterly level”—driving mix/realizations and flexibility across China and Southeast Asia .
  • CMT rebound post-bridge collapse: 4.7M tons shipped, $23.7M revenue, and adjusted EBITDA $15.9M vs. $14.9M LY, showcasing logistics recovery and throughput normalization .

What Went Wrong

  • Itmann ramp slower than expected due to equipment delays and adverse geology; Q3 sales of 152k tons vs. 164k in Q2 and guidance cut to 0.6–0.8M tons for FY24 .
  • Domestic utility demand overhang from mild winter and low gas weighed on coal procurement earlier in 2024; management remained patient on contracting in industrial export markets amid pet coke weakness .
  • Lingering logistical/timing impacts from Baltimore incident created inventory and shipment timing challenges; business interruption claim of ~$60M+ submitted, settlement targeted by year-end .

Financial Results

Core Financials vs. Prior Quarters

MetricQ1 2024Q2 2024Q3 2024
Diluted EPS ($)$3.39 $1.96 $3.22
Net Income ($USD Millions)$102 $58 $96
Adjusted EBITDA ($USD Millions)$182 $125 $179
Free Cash Flow ($USD Millions)$41 $59 $122

Operating Metrics and Segment KPIs

MetricQ1 2024Q2 2024Q3 2024
PAMC Coal Sold (Million Tons)6.1 5.8 6.8
PAMC Production (Million Tons)6.5 5.6 7.2
PAMC Avg Coal Revenue per Ton ($)$68.33 $66.83 $64.28
PAMC Avg Cash Cost of Coal Sold per Ton ($)$40.29 $39.82 $35.85
Cash Margin per Ton ($)$28.04 (calc: $68.33-$40.29) $27.01 (calc: $66.83-$39.82) $28.43 (calc: $64.28-$35.85)
Itmann Sales (Thousand Tons)193 164 152
CMT Shipments (Million Tons)4.5 2.3 4.7
CMT Revenues ($USD Millions)$24.5 $12.0 $23.7
CMT Adjusted EBITDA ($USD Millions)$16.8 $5.2 $15.9
Dividend Declared ($/share)——$0.25 (payable Nov 26, 2024)

Estimates vs. Actuals

MetricConsensus (Q3 2024)Actual (Q3 2024)
EPS ($)Unavailable – SPGI mapping not returned$3.22
Revenue ($USD Millions)Unavailable – SPGI mapping not returnedN/A (not disclosed in transcript) —
Adjusted EBITDA ($USD Millions)Unavailable – SPGI mapping not returned$179

Note: S&P Global/Capital IQ consensus estimates were not retrievable due to a mapping issue in our system; therefore, estimate comparisons are unavailable for Q3 2024.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
PMC Avg Coal Revenue per Ton ($)FY 2024$63.50–$66.50 $64.50–$66.00 Midpoint increased/tightened
PMC Avg Cash Cost per Ton ($)FY 2024$37.50–$39.50 $37.50–$38.50 Top end lowered by $1
PMC Sales Volume (Million Tons)FY 202424.5–26.0 25.0–26.0 Bottom end raised +0.5M
Itmann Sales Volume (Thousand Tons)FY 2024700–900 600–800 Lowered by 100k
Capital Expenditures ($USD Millions)FY 2024$165–$190 Maintained Maintained
DividendQ4 2024—$0.25/share payable Nov 26, 2024 New dividend declared

Earnings Call Themes & Trends

TopicQ1 2024 (Prior-2)Q2 2024 (Prior-1)Q3 2024 (Current)Trend
AI/data center power demandEmphasized rising U.S. electricity needs from AI/EVs and utilities building gas/coal plants; long-term domestic indicators rising PJM capacity auction up ~800% YoY, signaling tighter supply and potential extension of coal fleet life Data center build-outs highlighted as domestic demand accelerant; positive signs for baseload power Strengthening
Supply chain (Itmann)Equipment delays and staffing constraints; suspended cost guidance Still facing equipment delays; staffing improving First of 4 continuous miners received in Oct; retreat mining began; deep cut plan approved to improve efficiency Improving, but not yet at plan
Macro/pricing (pet coke, freight, API2)CFR India/API2 supportive amid U.S. high-CV export constraints; export mix rising Pet coke near floor; vessel freight high; patient on export contracting; API2 sensitivity discussed API2 ~$115; pet coke lifting from lows; buyers securing cargo ahead of winter Normalizing into winter
Product performance (crossover met)508k tons crossover met sold in Q1; push into SE Asia China a big taker; >800k YTD to China by Q2 1.1M tons shipped in Q3—highest ever quarterly; strong China/SEA demand Accelerating
Regional trends (Europe/Asia)SE Asia interest; export share >60% Alt-port into Egypt/Brazil/China; India expected pickup post-monsoon Europe inventories low; 400k tons contracted; winter weather to drive API2 Europe recovering
Regulatory/legalClean Power Plan concerns; reliability risks and potential retirements —All antitrust approvals for Arch merger; SEC S-4 filed; Q1’25 closing anticipated Merger progressing
Insurance (FSK Bridge)Port closure impacts; throughput strategies Working BI claim with insurers Formal BI claim submitted (~$60M+); targeted settlement by YE’24 Advancing toward recovery

Management Commentary

  • “PAMC achieved its highest ever third quarter sales and production tonnage level…lowest cash cost of coal sold per ton since the first quarter of 2023” — James Brock .
  • “We shipped a total of 1.1 million tons into the crossover met market during 3Q'24…our highest ever quarterly level into that market” — Mitesh Thakkar .
  • “We achieved net income of $96 million, or $3.22 per diluted share and adjusted EBITDA of $179 million…generated $122 million of free cash flow” — Mitesh Thakkar .
  • “We submitted a formal claim…about $60-plus million for the business interruption…hope to reach final settlement by the end of 2024” — Mitesh Thakkar .
  • “All antitrust regulatory closing conditions [for Arch merger]…we still anticipate closing to occur by the end of Q1 '25” — James Brock .

Q&A Highlights

  • 2025 contract book: ~18M tons; breakdown across domestic fixed and export indexed (with floors/ceilings); average price modeled low-$60s at $115 API2; sensitivity ~$0.03–$0.04 per $1 for Q4; additional export/domestic opportunities expected .
  • Cost dynamics: seeing early consumables deflation and procurement leverage; Q3 production tonnage helped lower unit costs .
  • Insurance claim: ~$60M+ BI claim submitted; management expects claim to hold; settlement targeted by YE’24 .
  • Operational cadence: Q4 free of longwall moves; holiday shutdowns expected; inventory timing smoothing with rail/vessel schedules; export run-rate strong .
  • Capacity: PAMC demonstrated capacity up to ~28.5M tons under favorable conditions, with historical >27M in 2018–2019 .

Estimates Context

  • S&P Global/Capital IQ consensus estimates for Q3 2024 (EPS, revenue, EBITDA) were unavailable due to a CIQ mapping issue in our system; as a result, estimate comparisons could not be performed this quarter. Management’s actuals: diluted EPS $3.22, net income $96M, adjusted EBITDA $179M .

Key Takeaways for Investors

  • Mix and optionality drove a strong rebound quarter: volumes, per-ton economics, and free cash flow improved meaningfully despite prior logistics constraints .
  • Cost execution was notable: PAMC cash cost/ton fell to $35.85, benefiting from production scale and procurement discipline; expect continued focus on inflation mitigation .
  • FY24 guidance quality improved: price/ton tightened upward, cash cost lowered, and volume range raised; Itmann remains a near-term headwind but with operational steps taken to improve productivity .
  • Strategic contracting: 2025 book expanded to ~18M tons with balanced domestic fixed and export indexed exposure; average price modeled low-$60s at $115 API2 with floors/ceilings providing downside protection .
  • Near-term catalysts: potential ~$60M+ BI insurance recovery, dividend payout ($0.25/share), and ongoing merger process with Arch—a path to scale, synergies, and portfolio diversification .
  • Trading setup: winter-driven Europe/API2 dynamics, China/SEA crossover demand, and domestic data center-driven baseload requirements support realizations and volumes into Q4/Q1; watch pet coke normalization and freight costs .
  • Medium-term thesis: durable export optionality plus domestic baseload demand (AI/data centers) and disciplined capital allocation (buybacks/dividends) position CEIX for resilient cash generation; Itmann ramp and merger integration are key execution variables .