Natural Resource Partners Beats on Earnings, Down Y/Y - Analyst Blog

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Natural Resource Partners L.P. ( NRP ) reported first quarter 2014 earnings of 29 cents per unit, down 33% year over year. Earnings, however, managed to edge past the Zacks Consensus Estimate of 28 cents.

The earnings downside reflects lower production by lessees and a decline in coal royalty receipts.

Total Revenues

Natural Resource Partners' top line plunged 15% year over year to $80.3 million on account of a 33% drop in coal revenues. Revenues in the reported quarter nominally surpassed the Zacks Consensus Estimate of $78 million.

Coal royalty revenues declined 20% to $43.5 million from the prior-year quarter. This happened due to lower realizations from the Appalachian operations. Average coal royalty per ton also decreased 9.9% year over year.

Production Update

Coal production during the quarter fell sharply by 11.4% from the year-ago quarter to 12.3 million tons. This is largely attributed to a 19.6% production downturn from Appalachian operations. Metallurgical coal contributed 28% to the overall coal production mix, marginally above the year-ago share of 27%.

Illinois Basin clocked a production upsurge of 7.9% year over year to 3.1 million tons. Northern Powder River basin and Gulf coast operation also registered a 10.6% and 34.1% increase in production, respectively, from the year ago quarter.

Operational Highlights

Total operating costs and expenses of Natural Resource Partners during the quarter totaled $27.9 million, down 12.4% from the prior-year quarter. A 49.4% and 8.1% decrease in general and administrative expenses as well as transport expense led to lower costs.

Interest expenses rose to $19.9 million from $14.7 million in the year-ago quarter.

Financial Screening

Cash from operating activities during the quarter was $38.6 million versus $43.9 million in the prior-year quarter.

In the first quarter, distributable cash flow was $38.9 million, down 12% from the year-ago period. This was due to lower revenues from coal royalty partially offset by an additional $11.4 million received as distributions associated with investments in OCI Wyoming.

Cash and cash equivalents as of Mar 31, 2014 were $54.8 million versus $92.5 million as of Dec 31, 2013. The substantial decrease in Natural Resource Partners' cash balance from the year-ago quarter was due to cash payments including interest payments and annual long-term incentive plan payments.

Long-term debt as of Mar 31, 2014 was $1,045.2 million versus $1,084.2 million as of Dec 31, 2013.

Other Coal Company Releases

SunCoke Energy, Inc. ( SXC ) incurred a first quarter loss of 11 cents per share, much wider than the Zacks Consensus Estimate of a loss of 1 cent per share.

Alliance Resource Partners L.P. ( ARLP ) posted earnings per unit in the first quarter of 2014 of $2.20, higher than the Zacks Consensus Estimate $1.74.

Alliance Holdings GP, L.P. ( AHGP ) reported first-quarter 2014 earnings of $1.13 per unit, beating the Zacks Consensus Estimate by 14 cents.

Our View

Natural Resource Partners reported modest earnings and revenue beat in the first quarter 2014. However, year-over-year results were dismal as weakness in the coal market badly hit coal production.

Going ahead, the 3.1% predicted growth in global steel usage in 2014 by the World Steel Association will act as a demand catalyst for metallurgical coal. Yet, the current demand-supply imbalance will keep prices at depressed levels in the near term. This has led the lessees to reduce its metallurgical coal production outlook. The partnership currently holds a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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