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    Earnings call· Jun 2026(Q2 FY26)

    NACCO INDUSTRIES Q2 FY26 earnings call NC

    Aug 6, 2026 Source

    Executive summary

    NACCO Industries Q2 FY26 — Strong Core Performance Offset by Solar Impairment

    NACCO Industries delivered strong operational results across its core mining and natural resources businesses, reflected in significant gross profit and adjusted EBITDA growth. However, these gains were overshadowed by a $12 million impairment charge on solar development projects, prompting a reassessment of capital allocation outside established platforms. Management emphasized a disciplined investment approach, prioritizing balance sheet strength and high-return opportunities.

    Highlights

    4

    • Gross profit increased 123% year-over-year to $15.2 million.

    • Consolidated adjusted EBITDA rose 72% year-over-year to $15.9 million.

    • Contract mining revenues grew 34% net of reimbursed costs, with substantial increases in operating profit and adjusted EBITDA.

    • Utility Coal Mining operating profit increased to $6.3 million from $1.2 million in the prior year quarter.

    Concerns

    4

    • Incurred $12 million in impairment charges related to two solar development projects within REGEN Resources.

    • Reported a consolidated operating loss of $2.3 million and a net loss of $1 million, or $0.13 per share.

    • Faces delayed payments from a key customer at Mississippi Lignite Mining Company.

    • Expects Minerals & Royalties profits to moderate near-term due to production declines and development activity pace.

    Guidance & targets

    13
    CategoryTargetConfidence
    Full-year Utility Coal Mining operating profit
    increase year-over-year
    medium materiality
    High
    Mississippi Lignite Mining Company (MLMC) results
    decline from the first half
    medium materiality
    High
    Utility Coal Mining profitability
    improve
    medium materiality
    Medium
    Full-year 2026 Contract Mining operating profit and segment-adjusted EBITDA
    substantial year-over-year growth
    medium materiality
    High
    Second half 2026 Contract Mining results
    moderate from the strong first half
    medium materiality
    High
    2027 Contract Mining operating profit
    significant operating profit improvement
    medium materiality
    High
    Minerals & Royalties operating profit and segment-adjusted EBITDA
    projected to decline
    medium materiality
    High
    2027 Minerals & Royalties operating profit
    expected to moderate
    medium materiality
    Medium
    Full-year 2026 consolidated adjusted EBITDA
    drive year-over-year improvements
    high materiality
    High
    Second half and full year 2026 operating profit and net income
    lower than in 2025
    high materiality
    High
    Second half 2026 consolidated adjusted EBITDA
    expected to remain strong, although the pace of growth is expected to moderate
    medium materiality
    High
    Cash flow before financing
    improve modestly over 2025
    medium materiality
    High
    Investment in business development opportunities
    up to $35 million
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Utility Coal Mining
    Revenues decreased due to lower customer requirements. Operating profit and adjusted EBITDA improved primarily due to better Mississippi Lignite Mining Company results as resources were shifted to planned reclamation activities, increased earnings from unconsolidated operations, and lower operating expenses. H2 2026 results expected to decline due to lower customer demand, higher diesel costs, and anticipated inventory impairment. 2027 profitability expected to improve.
    Operating profit increased from $1.2 millionSegment-adjusted EBITDA increased to $8.7 million from $3.4 millionResources shifted to planned reclamation activities
    		decreased——$6.3 million
    Contract Mining
    Revenues net of reimbursed costs increased 34%. Current quarter results benefited from the commencement and ramp-up of the Palm Beach County Drag Line Services Contract and increased customer requirements. Substantial year-over-year growth in operating profit and adjusted EBITDA expected for full-year 2026. H2 results expected to moderate. Significant operating profit improvement expected in 2027.
    Operating profit increased from $1 millionSegment-adjusted EBITDA increased to $6.3 million from $3.9 millionCommencement and ramp-up of Palm Beach County Drag Line Services ContractIncreased customer requirements and deliveries at limestone mining operations
    		34% increase34%—$3.8 million
    Minerals & Royalties
    Improvements primarily due to a 46% increase in royalty revenues driven by higher oil prices and a favorable adjustment to prior period pricing estimates, partly offset by lower earnings from IGR investment. Operating profit and adjusted EBITDA projected to decline for the remainder of 2026 compared to H1 2026 and prior periods. 2027 operating profit expected to moderate due to normal production declines and current pace of domestic development activity.
    Operating profit increased from $5.2 millionSegment-adjusted EBITDA increased to $7.7 million from $6.1 millionRoyalty revenues increased 46% driven by higher oil prices
    		———$6.7 million
    REGEN Resources (Solar Projects)
    Incurred $12 million in impairment charges related to two solar development projects due to increased costs, delays in grid connection, and tax law changes. The company is pursuing alternatives to monetize these investments and reduce future exposure.
    Impairment charges totaling $12 million
    		————

    Operational metrics

    11
    Consolidated Revenues
    $72.3 millionup 6% from $68.2 million in Q2 FY25
    Q2 FY26
    Consolidated Gross Profit
    $15.2 millionup 123% from $6.8 million in Q2 FY25
    Q2 FY26
    Consolidated Operating Loss
    $2.3 millioncompared with an operating loss of less than $100,000 in Q2 FY25
    Q2 FY26
    Consolidated Net Loss
    $1 millioncompared with net income of $3.3 million in Q2 FY25
    Q2 FY26
    Consolidated Adjusted EBITDA
    $15.9 millionup 72% from $9.3 million in Q2 FY25
    Q2 FY26

    This measure excludes the solar-related charges and highlights the improvement in the underlying operating businesses.

    Outstanding Debt
    $120.1 million
    as of June 30, 2026
    Total Liquidity
    $114.6 million
    as of June 30, 2026

    Consisting of cash and revolving credit facility availability.

    Cash
    $45.5 million
    as of June 30, 2026
    Revolving Credit Facility Availability
    $69.1 million
    as of June 30, 2026
    Minerals & Royalties Royalty Revenues
    46%increase
    Q2 FY26

    Driven by higher oil prices and a favorable adjustment to prior period pricing estimates.

    Cash flow before financing
    projected to remain a use of cashimprove modestly over 2025
    FY26

    Expected to continue improving into 2027. This is the company's term for FCF. Transcription note: '2040' in transcript is likely an ASR error, corrected to '2026' based on surrounding context.

    Deals & partnerships

    1
    Not specifiedMonetizing investments in two solar development projects within REGEN Resources.

    Alternatives include potential asset sales, contract amendments, and other strategic actions following a $12 million impairment charge.

    Capital programs

    1
    Business Development Opportunitiesanticipated investingup to $35 million
    Period spend: up to $35 million
    Start: Q3 FY26

    Benefit: high return investment opportunities

    We anticipate investing up to $35 million in the remainder of the year, primarily for business development opportunities, but only if investment opportunities meet our capital investment criteria. Implied funding from free cash flow.

    Risks & headwinds

    4
    Solar project impairment and future exposureQ2 FY26 (impairment), future (additional charges)

    $12 million in impairment charges; potential for additional curtailment charges

    Mitigation: Pursuing asset sales, contract amendments, and other strategic actions to monetize investments and limit future capital requirements. Applying heightened scrutiny to non-core investments.

    Delayed payments from customer at Mississippi Lignite Mining Company (MLMC)Ongoing

    Amounts owed (not quantified)

    Mitigation: Actively engaged with the customer, preserving contractual rights, evaluating all options available under the contract, and enforcing economic protections.

    Lower customer demand, higher diesel fuel costs, and anticipated inventory impairment at MLMCSecond half of 2026

    Expected to cause H2 2026 results to decline from H1

    Mitigation: Monitoring customer demand, collection timing, and inventory valuation closely.

    Production declines and changing mix of production/development activity in Minerals & RoyaltiesRemainder of 2026 and 2027

    Operating profit and segment-adjusted EBITDA projected to decline compared to H1 2026, H2 2025, and FY25

    Mitigation: Managing the portfolio with a long-term view and continuing to build on the quality of the assets owned.

    What to watch in Q3 FY26

    5

    MLMC customer payment status

    Next quarter
    Currentdelayed payments disclosed in our 10-Q
    TargetResolution of delayed payments

    Why it matters

    Critical for MLMC's financial stability and overall Utility Coal Mining segment profitability.

    We are actively engaged with the customer regarding the delayed payments disclosed in our 10-Q. We are focused on collecting amounts owed, preserving our contractual rights, and evaluating all options available under the contract.

    Q&A highlights

    5

    Seeking clarity on the reduced demand for MLMC's generation, the impact of power plant outages and dispatch decisions by TVA, and the company's recourse regarding the delayed receivable.

    Management explained that MLMC's operations are subject to the power plant's planned/unplanned outages and TVA's dispatch decisions, which can be influenced by tax credits for renewables. They confirmed active engagement with the customer and intent to enforce contractual rights regarding the receivable, but declined to discuss specific legal strategies.

    “We knew it was going to be down for a while while they were repairing it. So we diverted our work to reclamation activities that go through, you know, those costs get charged the balance sheet as opposed to the income statement because we've got a reclamation liability.”

    asked by Douglas Weiss · answered by John Butler

    2 min read6 chapters

    Detailed Narrative

    01

    Solar Project Impairment and Capital Allocation Reassessment

    NACCO recorded a $12 million impairment charge on two solar development projects within REGEN Resources due to increased costs, delays in grid connection, and challenges from tax law changes. This event prompted a critical reassessment of capital allocation discipline for investments outside established mining and natural resources operations. The company is actively pursuing alternatives, including asset sales and contract amendments, to monetize these investments and limit future capital requirements, acknowledging the potential for additional curtailment charges.

    02

    Utility Coal Mining Performance and Challenges

    The Utility Coal Mining segment saw a significant increase in operating profit to $6.3 million, primarily driven by Mississippi Lignite Mining Company (MLMC) effectively shifting resources to planned reclamation activities during a customer power plant outage. However, the segment faces headwinds in the second half of 2026, including lower customer demand, higher diesel fuel costs, and an anticipated inventory impairment charge. The company is also closely monitoring and enforcing contractual rights regarding delayed payments from a key customer.

    03

    Contract Mining as a Growth Platform

    Contract Mining demonstrated strong growth, with revenues increasing 34% and substantial improvements in operating profit and adjusted EBITDA. This was largely fueled by the commencement and ramp-up of the Palm Beach County Drag Line Services Contract and increased limestone mining operations. The company is expanding geographically, preparing to open a new limestone quarry in Arizona, and exploring new market applications for its services, such as infrastructure development beyond traditional aggregates.

    04

    Minerals & Royalties Contribution and Outlook

    The Minerals & Royalties segment delivered strong Q2 results, with royalty revenues up 46% due to higher oil prices and favorable prior period pricing adjustments. Despite this, the segment anticipates a moderation in operating profit and adjusted EBITDA for the remainder of 2026 and into 2027. This expected decline is attributed to normal production declines on existing wells and a continuation of the current moderate pace of domestic development activity, particularly in natural gas.

    05

    Liquidity and Balance Sheet Focus

    NACCO remains committed to strengthening its balance sheet and enhancing liquidity. As of June 30, 2026, the company reported total liquidity of $114.6 million, comprising $45.5 million in cash and $69.1 million available under its revolving credit facility. Management is prioritizing the use of free cash flow to reduce debt and fund disciplined, high-return investment opportunities, with an anticipated investment of up to $35 million in business development for the remainder of the year.

    06

    Strategic Diversification and Synergies

    Management emphasized a long-term, diversified investment approach, leveraging core skills and assets across its businesses. They highlighted synergies between the core mining operations and the mitigation business, fostering a 'one-team approach.' This strategy aims to create a stable, long-term platform by balancing the strong earnings from legacy businesses with growth platforms and diversification, particularly in the context of the current energy landscape.

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