Overview of the Company’s Financial Performance

Warrior Met Coal, Inc. is a U.S.-based supplier of premium steelmaking coal to the global steel industry. The company operates two underground coal mines in Alabama and is developing a third, the Blue Creek mine, which is expected to be a transformational investment.

In 2024, Warrior Met Coal achieved strong financial results, generating net income of $250.6 million and adjusted EBITDA of $447.9 million. Sales volumes increased 6% to 7.2 million metric tons, while production rose 8% to 7.5 million metric tons, representing record annual production for one of the company’s mines.

However, the company’s average net selling price for steelmaking coal decreased 14% to $207.32 per metric ton in 2024, compared to $241.64 per metric ton in 2023. This decline was driven by weaker global demand and excess steel exports from China into Warrior Met Coal’s customers’ markets.

Revenue and Profit Trends

Warrior Met Coal’s total revenues decreased 9% in 2024 to $1.5 billion, primarily due to the lower average selling price, which offset a 6% increase in sales volumes. Other revenues, which include natural gas sales and royalties, also declined by $3.4 million or 12% year-over-year.

Despite the revenue decline, the company maintained strong profitability. Cost of sales increased 11% to $1 billion, driven by higher production volumes, labor and supply costs, and transportation expenses. However, Warrior Met Coal was able to offset these higher costs through operational efficiencies, resulting in a gross margin of 34% in 2024, down from 46% in 2023.

The company’s net income of $250.6 million in 2024 represented a 48% decrease from the prior year, primarily due to the lower average selling price for steelmaking coal. Adjusted EBITDA, a non-GAAP measure that excludes certain one-time and non-cash items, decreased 36% to $447.9 million.

Analysis of Strengths and Weaknesses

A key strength of Warrior Met Coal is its position as a large-scale, low-cost producer of premium steelmaking coal. The company’s mines are characterized by low-sulfur, low-to-medium ash, and low to high volatile matter content, making the coal highly desirable for steel production. This has historically allowed Warrior Met Coal to realize prices in line with or slightly below the benchmark Australian Premium Low Volatility index.

Another strength is the company’s progress on the development of the Blue Creek mine, which is expected to significantly increase Warrior Met Coal’s production capacity and cement its position as a leading pure-play steelmaking coal producer. The project remains on schedule, with the longwall scheduled to start up in the second quarter of 2026.

However, the company faces several weaknesses and challenges. The cyclical nature of the steel industry and the availability of steel product substitutes, such as aluminum and composites, pose risks to the demand for Warrior Met Coal’s products. The company is also exposed to inflationary pressures, which have increased costs for labor, materials, and transportation.

Additionally, Warrior Met Coal’s operations have been impacted by a labor strike that began in 2021 and is still ongoing. While the company has been able to partially mitigate the impact through idle mine and business interruption expenses, the strike has resulted in lost production and higher costs.

Outlook and Future Prospects

Looking ahead, Warrior Met Coal expects the pricing environment for steelmaking coal to remain under pressure due to the persistent weakness in the global steel markets and a modest increase in steel production in India. The company anticipates that inflation will continue to negatively impact its profitability, with cost increases ranging from 25% to 35% for labor, construction materials, and equipment.

However, the company remains optimistic about the long-term prospects for the steelmaking coal market, particularly as global supply is expected to be outpaced by demand growth from countries like India, Indonesia, and Vietnam. Warrior Met Coal believes the premium quality of its High Vol A steelmaking coal from the Blue Creek mine will allow it to capitalize on these favorable pricing dynamics.

The successful development of Blue Creek is a key priority for the company. Warrior Met Coal has invested $716.5 million in the project to date and expects to spend an additional $225 to $250 million in 2025 to complete the mine’s construction. Once operational, Blue Creek is expected to increase the company’s annual production capacity by approximately 60%, enhancing its profitability and cash flow generation.

Warrior Met Coal’s strong balance sheet, with $654.7 million in total liquidity as of December 31, 2024, provides the financial flexibility to fund the Blue Creek project and return capital to shareholders through dividends and share repurchases. The company’s capital allocation policy aims to optimize its capital structure and deliver meaningful value to stockholders.

Overall, Warrior Met Coal’s financial performance in 2024 was solid, despite the challenging market conditions. The company’s focus on developing its high-quality steelmaking coal reserves, managing costs, and returning capital to shareholders positions it well for the future, though it will need to navigate ongoing inflationary pressures and labor challenges.