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    CNR
    Earnings call· Jun 2026(Q2 FY26)

    Core Natural Resources Q2 FY26 earnings call CNR

    Aug 6, 2026 Source

    Executive summary

    Core Natural Resources Q2 FY26 — Strong Operational Performance and Capital Returns

    Core Natural Resources delivered a strong second quarter, marked by significant operational improvements in its HCV Thermal and Metallurgical segments, alongside the final settlement of the Leer South insurance claim. The company demonstrated a commitment to shareholder returns, increasing buybacks and maintaining a robust liquidity position. While facing headwinds in the PRB segment and broader metallurgical markets, management remains focused on cost discipline and capitalizing on long-term opportunities in power demand and infrastructure build-out.

    Highlights

    5

    • Net income increased to $126 million ($2.51 per diluted share) in Q2 FY26 from $21 million in Q1 FY26.

    • Adjusted EBITDA increased to $324 million in Q2 FY26 from $180 million in Q1 FY26.

    • Returned $68 million to shareholders in Q2 FY26, up from $47 million in Q1 FY26, with $329 million used to repurchase approximately 8% of shares since program inception.

    • Secured a grant from the U.S. Department of Energy for a pilot facility for rare earth elements and critical minerals extraction.

    • Metallurgical segment cash costs guidance lowered by $2.50 at midpoint to $86-$91 per ton, reflecting improved execution.

    Concerns

    4

    • Powder River Basin (PRB) coal sales decreased to 10.2 million tons in Q2 FY26 from 11.9 million tons in Q1 FY26 due to weak demand and low natural gas prices.

    • HCV Thermal segment cash costs guidance increased by $1 to $39-$40.50 per ton due to stickier inflationary pressures.

    • Metallurgical market faces near-term headwinds from macroeconomic factors and Middle East hostilities, impacting global steel production.

    • PRB segment cash cost guidance increased by $0.25 due to persistently higher diesel prices.

    Guidance & targets

    13
    CategoryTargetConfidence
    HCV Thermal segment cash costs
    $39 to $40.50 per ton
    medium materiality
    High
    Metallurgical segment cash costs
    $86 to $91 per ton
    medium materiality
    High
    PRB segment cash costs
    $13.25 to $13.75 per ton
    medium materiality
    High
    Shareholder returns
    around 75% of free cash flow
    high materiality
    High
    Global steel growth
    resumption in global steel growth
    medium materiality
    High
    Global coal-fired generation
    2% increase
    medium materiality
    High
    Global electricity demand growth
    3.6% a year
    medium materiality
    High
    HCV Thermal 2027 contracted position
    more than 50% contracted
    medium materiality
    High
    HCV Thermal India tons price
    $60 range
    medium materiality
    High
    HCV Thermal West Elk tons price
    upper 40s to low $50 type range
    medium materiality
    High
    Thermal byproduct price
    $50 to $55 range
    low materiality
    Medium
    Met market prices
    expected to improve
    medium materiality
    Medium
    New blast furnace capacity
    185 million tons
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    HCV Thermal
    Coal sales increased from 7.7 million tons in Q1 '26. Realized coal revenue was $58.11 per ton, compared to $58.86 per ton in Q1 '26. Cash costs improved significantly from $42.56 per ton in Q1 '26, benefiting from improved mining conditions, favorable sales, and normalized power costs. Adjusted EBITDA for the segment totaled $165 million, up from $126 million in Q1 '26.
    Coal sales: 8.4 million tonsCash costs: $38.58 per ton
    		$58.11 per ton——$165 million
    Metallurgical
    Coking coal sales increased to 2.3 million tons from 2.1 million tons in Q1 '26. Realized coking coal revenue was $121.43 per ton. The segment's average selling price, including 300,000 tons of thermal byproduct sales, was $114.13 per ton. Cash costs came in at $85.65 per ton, nearly a $7 per ton reduction QoQ, reflecting ongoing improvement and execution at longwall mines. Adjusted EBITDA for the segment was $200 million, which included insurance-related proceeds of $125 million.
    Coking coal sales: 2.3 million tonsThermal byproduct sales: 300,000 tonsCash costs: $85.65 per ton
    		$121.43 per ton (coking coal); $114.13 per ton (segment average)——$200 million
    Powder River Basin (PRB)
    Coal sales came in at 10.2 million tons, compared to 11.9 million tons in Q1 '26. This was a function of weak demand during the spring shoulder season, exacerbated by low natural gas prices. The company views this as a timing issue, with over 50 million tons committed for 2026. Pit inventory was built during the quarter to enhance operating margins in H2.
    Coal sales: 10.2 million tonsCash costs: $14.85 per ton
    		$14.28 per ton———
    Core Marine Terminal (CMT)
    The CMT shipped 5.2 million tons during Q2 '26, compared to 4.8 million tons in Q1 '26. Adjusted EBITDA was $18 million, an increase from $16 million in Q1 '26.
    Shipments: 5.2 million tons
    		———$18 million

    Operational metrics

    19
    Net income
    $126 millionUp from $21 million in Q1 FY26
    Q2 FY26

    Reported net income for the quarter.

    Adjusted EBITDA
    $324 millionUp from $180 million in Q1 FY26
    Q2 FY26

    Reported adjusted EBITDA for the quarter.

    Total liquidity
    $1 billion
    End of Q2 FY26

    Total liquidity position at the end of the quarter.

    Unrestricted cash and short-term investments
    $474 millionIncrease of $81 million compared to Q1 FY26
    End of Q2 FY26

    Unrestricted cash and cash equivalents and short-term investments.

    Leer South insurance claim settlement
    $155 million
    Aggregate

    Total settlement amount for the Leer South insurance claim.

    Shareholder returns
    $68 millionUp from $47 million in Q1 FY26
    Q2 FY26

    Amount returned to shareholders in Q2 FY26.

    Shareholder returns since program inception
    $360 millionOver 80% of free cash flow
    Since Feb 2025

    Cumulative amount returned to shareholders since the program's inception.

    Shares repurchased value
    $329 million
    Since program inception

    Value of shares repurchased since the program's launch.

    Working capital swing
    $75 million to $100 million
    Future periods

    Expected swing in working capital, vast majority expected to flow this year.

    45X tax credit accrual
    $25 million
    Year-to-date

    Accrued tax credit that will provide a tailwind in future periods.

    DTA ownership
    35%
    Current

    Core Natural Resources' ownership stake in DTA.

    Core Innovations aerospace and defense revenue
    $20 million
    Annual

    Revenue generated by the aerospace and defense vertical within Core Innovations.

    API2 price modeling
    $110
    H2 FY26

    Price used for modeling to achieve $58/ton guidance for HCV Thermal.

    July API2 price
    $120
    July

    Actual API2 price in July. Transcription error in source quote of '$1.20' corrected to '$120' based on context of API2 pricing and sensitivity.

    Domestic coal burn
    Down approximately 10%vs 2025
    Year-to-date

    Impacted by low natural gas prices, elevated customer stockpiles, and seasonal weakness.

    High-vol A production increase
    5 million tons
    H1 FY26

    Increase in high-vol A production in the first half of the year.

    Other U.S. mines production decline
    3 million tons
    H1 FY26

    Decline in production from other mines in the U.S. system.

    ArcelorMittal blast furnaces restarting
    3
    Recent

    Restarting on the expectation that European steel imports will drop.

    European steel imports drop
    45%
    Expected

    Expected drop in European steel imports.

    Industry KPIs

    5
    MetricValueDetails
    Pipeline throughput storage5.2 million tonstons
    Realized price differential$58.11 per ton (HCV Thermal); $121.43 per ton (Metallurgical coking coal); $114.13 per ton (Metallurgical segment average); $14.28 per ton (PRB)USD
    Basin level production volume8.4 million tons (HCV Thermal); 2.3 million tons (Metallurgical coking coal); 10.2 million tons (PRB)tons
    Cost of supply unit cash cost$38.58 per ton (HCV Thermal); $85.65 per ton (Metallurgical); $14.85 per ton (PRB)USD
    FCF shareholder distributions$148 million (FCF); $68 million (dividend + buyback)USD

    Orderbook & backlog

    4
    PRB coal committed for deliveryMore than 50 million tonsQ2 FY26

    Expected to be shipped this calendar year or value captured via blend and extend initiatives.

    Contracted volume across segmentsApproximately 16 million tonsQ2 FY26

    Secured through 2030 at attractive prices.

    Metallurgical coking tons contracted8.7 million tonsQ2 FY26

    Added 400,000 tons

    For 2026, with approximately 6 million tons priced.

    PRB contracted positionApproximately 50 million tonsQ2 FY26

    At an average committed price of $14.27 per ton.

    Deals & partnerships

    2
    U.S. Department of EnergyGrant to construct a pilot scale facility for the extraction of rare earth elements and critical minerals.

    The facility will be located at the Pennsylvania Mining Complex, underscoring Core's progress in innovative technologies and national strategic importance.

    Northrop GrummanCore Touchstone Advanced Composite Group named a key supplier of tooling and components for the Talon Blue collaborative combat aircraft.

    This follows an announcement made earlier in the year, highlighting Core's role in advanced composite materials.

    Capital programs

    1
    Pilot scale facility for rare earth elements and critical minerals extractionunderway
    Funding: Grant from the U.S. Department of Energy

    Benefit: Extraction of rare earth elements and critical minerals

    Selected for a grant from the U.S. Department of Energy to construct a pilot scale facility at the Pennsylvania Mining Complex, advancing national strategic importance.

    Risks & headwinds

    7
    Weak demand and low natural gas prices (PRB)Q2 FY26

    PRB coal sales down to 10.2 million tons in Q2 '26 from 11.9 million tons in Q1 '26.

    Mitigation: Viewing as timing issue, 50 million tons committed for 2026, building pit inventory to enhance margins in H2.

    Inflationary pressures (HCV Thermal)Remainder of 2026

    Cash costs guidance increased by $1 to $39-$40.50 per ton.

    Mitigation: Ongoing focus on cost management and operational improvements.

    Persistently higher diesel prices (PRB)Remainder of 2026

    Cash costs guidance increased by $0.25 to $13.25-$13.75 per ton.

    Mitigation: Ongoing focus on cost management.

    Macroeconomic factors and Middle East hostilities (Metallurgical)Near-term

    Weighing on global steel production and coking coal demand.

    Mitigation: Long-range outlook promising due to industrialization in Southeast Asia and India; expected recovery in seaborne met market.

    Low natural gas prices, elevated customer stockpiles, seasonal weakness (Domestic Thermal)Q2 FY26

    Domestic coal burn down approximately 10% YTD vs 2025.

    Mitigation: Conditions setting up for stronger H2 FY26 with units returning from outages and hot weather driving demand; utilities evaluating plant life extensions.

    Uncertainty surrounding conflict in Middle East and LNG disruptions (International Thermal)Ongoing

    Driving market volatility, reduction in global LNG supply, increased price volatility across competing fuels.

    Mitigation: Potential disruptions to pet coke supplies could benefit HCV thermal sales into Indian cement market.

    DTA outage impactOngoing

    Too early to assess full damage, but impact on Core is "relatively small" due to 35% ownership. Some capacity constraints at the terminal.

    Mitigation: DTA has insurance; Core's marketing team managed impact by moving things around to minimize disruption.

    What to watch in Q3 FY26

    5

    Share Buyback Pace

    Q3 and Q4 FY26
    Current$68 million in Q2 FY26, $329 million total since Feb 2025 (8% of shares).
    TargetHeavier share buyback percentages

    Why it matters

    Demonstrates commitment to capital returns and free cash flow deployment, impacting shareholder value.

    So going forward⏳ in Q3 and Q4, I think you can expect us to have a heavier share buyback percentages as we use that cash going forward⏳.

    Q&A highlights

    6

    What are the 2027 prices for HCV tons, what percentage is contracted, and is $60/ton a reasonable average?

    HCV is more than 50% contracted for 2027. India tons are in the $60 range, West Elk tons in the upper $40s to low $50s. The average realization for the segment is in the upper $50s to low $60s, considering PAMC (27M tons) and West Elk (5-6M tons) volumes.

    “The India tons today are in that $60 range, as you mentioned. The West Elk tons, I'd say, are more in the upper 40s to low $50 type range. But again, when you look at what the balance is, PAMC, obviously, at 27 million tons, West Elk at, call it, 5 million to 6 million tons. Your average realization is in that upper 50s to low 60 range.”

    asked by George Eadie · answered by Robert Braithwaite

    2 min read6 chapters

    Detailed Narrative

    01

    Leer South Insurance Settlement

    Core Natural Resources successfully settled the Leer South insurance claim for $155 million in aggregate, with $125 million recognized in Q2 FY26 EBITDA and $30 million in prior quarters. This settlement, which included $88 million in cash received in Q2, significantly contributed to the quarter's financial performance and allowed the company to focus on core operations. All outstanding receivables associated with the claim were collected by the end of July.

    02

    Capital Allocation Strategy

    The company maintains a capital return framework targeting approximately 75% of free cash flow to shareholders, primarily through share repurchases. Since its inception in February 2025, the program has returned over 80% or $360 million of free cash flow, repurchasing about 8% of outstanding shares. Management expects a "heavier share buyback percentage" in Q3 and Q4 FY26 due to cash build-up from insurance proceeds and anticipated working capital release.

    03

    Core Innovations Progress

    Core Innovations secured a grant from the U.S. Department of Energy to build a pilot facility for rare earth elements and critical minerals extraction at the Pennsylvania Mining Complex. This initiative, alongside the Northrop Grumman contract for Core Touchstone Advanced Composite Group as a key supplier for the Talon Blue aircraft, highlights the company's efforts to diversify and unlock value from the coal supply chain. The aerospace and defense vertical currently generates about $20 million in revenue.

    04

    Market Dynamics and Outlook

    Metallurgical markets face near-term headwind📎s from global steel production declines, but the long-range outlook is promising due to continued industrialization in Southeast Asia and India, with 185 million tons of new blast furnace capacity expected by 2030. Domestic thermal coal demand was weak in Q2 due to low natural gas prices and high stockpiles, but is expected to strengthen in H2 FY26 with improving demand and increased rail set availability. International thermal markets show volatility due to Middle East conflict and LNG disruptions, but IEA projects a 2% increase in global coal-fired generation in 2026.

    05

    Power Market Fundamentals

    U.S. power market fundamentals are increasingly favorable, driven by robust electricity demand from data center growth and industrial reshoring, which outpaces additions of dispatchable generation. Elevated PJM capacity auction clearing prices reflect tightening reserve margins, increasing the value of existing thermal generation assets and highlighting reliability as a strategic priority. Federal funding through the Defense Production Act also supports planned upgrades.

    06

    Cost Management and Operational Excellence

    Core demonstrated exceptional cost📎 performance in Q2 FY26, with significant reductions in HCV Thermal and Metallurgical segments. This was attributed to improved mining conditions, favorable sales, normalized power costs, and ongoing execution improvements at longwall mines, including schedule changes and moving Leer to better seams. Management believes these cost reductions are sustainable and expects further improvements, aiming for a consistent cost basis.

    AI-generated summary of the company’s earnings call. Not investment advice.