Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Peabody Energy Corp (NYSE:BTU) reported a strong finish to 2024 with solid fourth-quarter results despite facing geologic and pricing challenges.
• The company successfully shipped its first coal from the Centurion mine and agreed to acquire multiple premium hard coking coal mines from Anglo American.
• Peabody Energy Corp (NYSE:BTU) returned $221 million to shareholders in 2024 while continuing to reinvest in the business.
• The company set a new record for the lowest accident rates in its 140-plus-year history and reclaimed 70% more land than it disturbed.
• Peabody Energy Corp (NYSE:BTU) achieved the top rating for governance by ratings firm ISS, highlighting its strong governance practices.

Negative Points

• Seaborne met coal prices have increased by 45% in the past year, but U.S. coal demand has not yet caught up with the expected uplift from growing domestic power demand.
• The company faced geologic challenges at its 20 Mile mine, impacting production, although increased production is now taking hold.
• Peabody Energy Corp (NYSE:BTU) anticipates lower Seaborne thermal volumes in 2025 due to reduced production at Wilpinjong and the closing of the Wambo underground mine.
• The company recorded a $41 million non-cash charge for the remeasurement of its Australian balance sheet due to a lower Australian dollar exchange rate.
• Peabody Energy Corp (NYSE:BTU) faces challenges with the new 15% tariff on U.S. coal imports to China, potentially impacting its business and Seaborne markets.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with BTU.

Q: Can you provide more details on the preemption rights process and any potential stake sales related to the Anglo assets or Centurion? A: (Jim Grech, CEO) The preemption rights process is progressing well, with a deadline in mid-March. Regarding asset sales, we are open to minority sales if fair value offers are made, whether for Anglo assets or Centurion. This is part of our financing strategy for the acquisition, but it's too early to predict outcomes.

Q: How should we interpret the 2025 guidance for met coal production and costs, especially with Centurion's contribution? A: (Mark Spurbeck, CFO) We expect an increase of over a million tons in Seaborne Met, with Centurion contributing 400,000 to 500,000 tons. Shoal Creek will also increase by about 600,000 tons. Costs are forecasted at $120 to $130 per ton, consistent with 2024, with some adjustments due to reconfiguring Capella and currency fluctuations.

Q: What is the status of regulatory approvals for the Anglo acquisition, and could anything delay the targeted closing? A: (Jim Grech, CEO) We have received several approvals, with others in process. The timing for these approvals ranges from late February to early April. Everything is proceeding as expected, and we anticipate meeting the targeted closing timeline.

Q: How are you balancing minority interest sales and debt for financing the Anglo acquisition? A: (Mark Spurbeck, CFO) Our plan includes high-yield secured notes as the primary funding source, with project-level equity sales as another key option. Discussions are underway, and there's strong interest. We remain confident in arranging financing as initially announced, with common equity issuance being a last resort.

Q: How will China's new 15% tariff on U.S. coal imports affect Peabody and the Seaborne markets? A: (Malcolm Roberts, Chief Marketing Officer) The tariff impacts U.S. coal's price competitiveness in Asia, potentially reducing our returns by 15% if we continue supplying to China. However, the market will adjust, possibly redirecting U.S. coal to other regions and Australian coal to China. This could affect Shoal Creek's returns in the short term.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.