Release Date: February 28, 2025

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

Positive Points

• Natural Resources Partners LP generated $251 million of free cash flow in 2024, demonstrating strong cash generation capabilities.
• The company redeemed all remaining preferred units and settled all outstanding warrants, reducing financial obligations.
• NRP increased its credit facility capacity by $45 million to $200 million and extended the maturity date to 2029, enhancing financial flexibility.
• The company has significantly deleveraged over the past decade, reducing debt from over $1.3 billion to $142 million.
• NRP is exploring carbon-neutral initiatives, including opportunities in carbon dioxide sequestration, lithium production, and renewable energy generation, which could provide future growth opportunities.

Negative Points

• Metallurgical and thermal coal prices dropped by half in 2024, impacting revenue and cash flow negatively.
• Global Soda Ash prices fell roughly 60% due to oversupply and decreased demand, leading to a significant reduction in cash distributions from Sisecam Wyoming.
• The market for soda ash is expected to remain challenging for several years, with prices below production costs for many producers.
• Exxon will not renew its carbon dioxide sequestration lease, indicating challenges in the carbon-neutral asset space.
• 2025 is expected to be a difficult year for NRP's key commodities, with lower prices anticipated to reduce free cash flow generation.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with AOIFF.

Q: Can you provide more details on the financial performance of the Mineral Rights segment in Q4 2024? A: Christopher Zolas, CFO, explained that the Mineral Rights segment generated $52 million of net income and $63 million of both operating and free cash flow in Q4 2024. Compared to the prior year's fourth quarter, net income decreased by $11 million, and both operating and free cash flow decreased by $8 million, primarily due to weaker coal demand and lower sales prices. However, these were partially offset by $12 million in revenues and $15 million in cash flow from one-time transactions, including forest-related carbon-neutral revenue and lease amendment fees.

Q: How did the Soda Ash business segment perform in 2024? A: Christopher Zolas, CFO, reported that the Soda Ash segment saw a decrease in net income by $14 million in Q4 and $55 million for the full year 2024 compared to the previous year. Operating and free cash flow also decreased by $5 million in Q4 and $43 million for the full year. These declines were attributed to lower sales prices due to an oversupplied market and weakened demand for construction flat glass.

Q: What are the expectations for coal prices in the near term? A: Craig Nunez, President and COO, stated that coal prices, which dropped by half from the highs of 2023, are not expected to rebound in the near term. This is due to soft global steel demand, low-priced North American natural gas, and high coal inventory levels at electric generating facilities.

Q: What is the outlook for the Soda Ash market? A: Craig Nunez, President and COO, mentioned that the Soda Ash market is facing challenges due to a flood of new production capacity and waning demand, particularly from slowing construction activity in China. It is expected to take several years for the market to absorb the excess capacity and drive prices higher.

Q: Can you elaborate on NRP's carbon-neutral initiatives? A: Craig Nunez, President and COO, highlighted that NRP is exploring opportunities to lease mineral and surface assets for carbon dioxide sequestration, forest carbon sequestration, lithium production, and renewable energy generation. However, CO2 sequestration activity remains low, and Exxon has decided not to renew their lease for CO2 sequestration on NRP's Baldwin County, Alabama acreage.

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