Ramaco Resources, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited results. Ramaco operates and develops metallurgical coal mines in Appalachia; the April 29 acquisition of Ramaco Coal added mineral interests, a Wyoming thermal coal deposit, and research and development facilities.
Financial performance
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Revenue | $138.7 million | $76.1 million | $293.5 million | $119.5 million |
| Operating income | $42.7 million | $7.0 million | $95.6 million | $8.3 million |
| Net income | $33.3 million | $9.9 million | $74.8 million | $14.1 million |
| Diluted EPS | $0.74 | $0.23 | $1.66 | $0.32 |
| Adjusted EBITDA (non-GAAP) | $57.9 million | $18.1 million | $121.9 million | $29.6 million |
- Q2 revenue rose 82%; H1 revenue rose 146%. Management attributed the improvement primarily to higher coal prices amid recovering metallurgical demand. FOB mine revenue per ton increased to $215 in Q2 from $97, and to $225 in H1 from $93.
- Q2 coal volume sold declined 15% to 584,000 tons, which the company attributed to rail constraints; H1 volume increased 5% to 1.167 million tons. H1 sales were 51% to North American markets and 49% to export markets.
- Cash cost per ton sold (FOB mine), a non-GAAP measure, increased to $108 in Q2 from $70 and to $109 in H1 from $66, reflecting higher sales-related costs and inflation. Operating margins were approximately 30.8% in Q2 and 32.6% in H1, versus 9.2% and 6.9% in the respective 2021 periods.
- H1 operating cash flow was $109.3 million, compared with $32.9 million. Capital expenditures were $53.8 million; cash dividends paid were $10.0 million. Cash and cash equivalents were $43.5 million at June 30, 2022.
Balance sheet, debt, and liquidity
- Current assets were $132.1 million and current liabilities $110.8 million at June 30, 2022. The current liability increase included $30.0 million due within a year on the Ramaco Coal acquisition financing.
- Reported debt and senior-note carrying amounts, including the related-party Ramaco Coal loan but excluding financing leases, totaled approximately $90.5 million. The Ramaco Coal loan had $50.0 million outstanding, bears 9% interest, and is secured by Ramaco Coal membership interests. Senior Notes had $34.5 million principal outstanding, bear 9% interest, and mature in 2026.
- The KeyBank revolving facility had $39.6 million available, with $0.4 million drawn as a letter of credit. The company reported compliance with its financial covenants. Financing lease obligations totaled $9.0 million.
- H1 cash flow included a $16.6 million inventory increase, primarily attributed to rail constraints. The company stated cash, expected operating cash flow, and available credit were expected to fund operating and capital needs; it also identified potential financing or reduced capital expenditures if cash flows proved insufficient.
Outlook, developments, and risks
- For the remainder of 2022, the company disclosed fixed-price obligations for approximately 1.1 million tons at an average $196 per ton, plus 0.2 million tons under index-based pricing. No broader quantitative earnings or production guidance is provided.
- On July 10, 2022, a material methane ignition occurred at the Berwind complex while the mine was idle. There were no injuries or fatalities; the cause and extent of damage were under investigation. Production was expected to be affected for an indeterminate period.
- On August 8, 2022, the company agreed to acquire Maben Coal for $30 million, comprising $9 million cash at closing and $21 million funded through a secured note facility. Closing remained subject to customary conditions.
- Management cited rail availability, inflation, coal-market prices and demand, operating and development costs, permitting, and customer and supplier performance as risks. It reported no meaningful direct financial exposure to Russia or Ukraine but noted related commodity-market volatility and potential effects of the EU ban on Russian coal.
- Customer concentration was significant: the top four customers represented about 65% of Q2 revenue, and those customers accounted for about 62% of accounts receivable. Contingent transportation take-or-pay liabilities were $8.2 million. A disputed insurance claim had been reduced by the court to a $1.8 million judgment; the company appealed and recorded no amount for the matter.
- The board approved a Q3 dividend of approximately $0.11 per share, payable September 15, 2022. The company said its previously reported IT access-control material weakness had been remediated as of June 30, 2022, and disclosure controls were effective at a reasonable-assurance level.
Key facts for investors to verify
- Berwind ignition damage, investigation findings, restart timing, and the effect on production and costs.
- Progress on rail constraints, sales volumes, and whether elevated realized pricing can be sustained alongside higher unit costs.
- Cash needs and repayment schedule for the Ramaco Coal acquisition loan, plus financing and closing conditions for Maben.
- Customer concentration, receivables collection, and the exposure and utilization of transportation take-or-pay commitments.
- Outcome of the insurance litigation appeal and any resulting financial-statement recognition.