Warrior Met Coal, Inc. (HCC) Q3 2019 Earnings Report, Transcript and Summary

Good afternoon. My name is Rocco, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Met Coal Third Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please also note today's event is being recorded. Before we begin, I have been asked to note that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press release and SEC filings. I have also been asked to note that the company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's website at www.warriormetcoal.com. In addition to the earnings release, the company has posted a brief supplemental slide presentation to the Investors section of its website at www.warriormetcoal.com. Here today to discuss the company's results are Mr. Walt Scheller, Chief Executive Officer; and Mr. Dale Boyles, Chief Financial Officer. Mr. Scheller, you may begin your remarks.

Thanks, operator. Hello, everyone, and thank you for taking the time to join us today to discuss our third quarter 2019 results. After my remarks, Dale will review our results in additional detail and then you'll have the opportunity to ask questions. Warrior performed exceptionally well and exceeded our expectations in the third quarter, which led to near-record quarterly high sales volumes. The mines continued their strong performance, achieving strong levels of production that drove the high sales volumes despite challenging market conditions impacting met coal prices. We recorded $288 million in revenues, $83 million of adjusted EBITDA and free cash flow of $118 million. Production volume in the third quarter was 2.2 million short tons compared to 1.8 million short tons produced in the same quarter of 2018, an increase of 19%. We successfully completed 2 longwall moves in the third quarter of this year, which is consistent with the amount of longwall move achieved in the third quarter of 2018. These results demonstrate the significant efforts made by our employees in anticipating and planning our longwall moves, proactively driving production efficiencies and managing our equipment downtime. In addition, the capital investments that we've made in our mines continue to be extremely beneficial as we strive to reach full capacity through improved production efficiencies and better equipment utilization with less downtime in a safe environment. A good example is the extra set of longwall shields that we purchased for Mine 7. The shields reduced the time required to move a longwall and therefore, mitigated the impact on production from the longwall moves. It also provided additional flexibility and risk mitigation to minimize periods of production downtime if we encountered unexpected geological conditions. The company spent $33 million on capital expenditures and mine development costs during the third quarter of this year compared to $24 million during the same period last year. This amount includes the longwall panel development costs for the ongoing extension of Mine 4 into 4 North, the next area of the mine plan. In addition, the 4 North cash spending included construction of the service shaft and hoist as can be seen on Pages 11 to 12 of our investor presentation on our website. When the 4 North extension is completed, it will feature new state-of-the-art equipment and facilities, including a new portal, bathhouse, power substation and bunkering system. We expect to be longwall mining in that area sometime in the next 5 to 6 years, and intend to spread the capital spending over that same time period. We achieved a sales volume of 2.0 million short tons in the third quarter of 2019, which reflects a 19% increase compared to the same quarter of 2018. Demand from our customers continue to be strong during the third quarter of this year despite the challenging market conditions, which I will discuss in a few minutes. Our sales by geography in the third quarter of 2019 were 55% into Europe, 25% into South America and 20% into Asia. By way of comparison, the geographical mix in last year's third quarter did not include any sales into Asia when sales were higher in both Europe and South America. Inventories increased 118,000 short tons from the second quarter to 602,000 short tons, primarily due to higher production volumes. We continuously manage our inventory levels to the lowest possible amounts while optimizing our supply chain and the flow of met coal deliveries to the port. Our actual level of inventory can be significantly impacted by several factors that are primarily timing related such as mixed, delayed schedules or loading delays caused by storms in the Gulf. The Platts Premium Low Vol Australian Index price closed the third quarter $52 per metric ton lower or approximately 27% lower than where it started the quarter in July. Our gross price realization for the third quarter was 102% of the Platts Premium Low Vol FOB Australian Index price and was higher than the prior year period of 97%. Remember, the actual percentage is a blended rate of our low and mid vol met coal sales. Let's now turn to market conditions in the third quarter. As we had anticipated, the global production growth of pig iron eased somewhat in the third quarter, coming off very strong results achieved in the first half of 2019. Despite a slower growth rate in the third quarter, global pig iron production over the first 9 months of 2019 was still up by 3.4% of the global pig iron production volume we saw for the same period of 2018. However, excluding Chinese production, global pig iron production volume across the remaining countries contracted by 1.4%. Lower production rates were felt in almost all producing countries in the Atlantic Basin as well as other prominent producing countries like Japan. The third quarter is normally a seasonally slower period but it is widely believed that the lower activity reflects the response of steel producers to softer demand and compressed margins. We believe these factors, among others, contributed to the dip in met coal prices during the third quarter. On average, the major pricing indices corrected more than 30% from their July 1 levels, establishing their low points toward the end of the third quarter. Despite being largely as expected, the correction was significantly quicker and steeper than predicted, surprising most market participants. We believe there were 3 principal drivers behind the correction in pricing: first, the implementation of Chinese port restrictions on imported coal; second, the slower demand for met coals outside of China; and third, the global seaboard supply chain that operated with minimal disruptions as in past quarters. Where your strong performance continues to demonstrate the unique value of our highly focused business strategy as a premium, pure-play and met coal producer. Our goal is to operate profitably and maximize cash flow generation in any pricing environment, not just in the favorable conditions we've experienced in the past. We've invested in the business where appropriate to support this strategy, and we've also continued to reward our stockholders as conditions warrant. Our operational successes are a credit to the hard work and dedication of our employees, and I thank them for all they've been doing to help us perform as strongly as we did in the third quarter. Our top priority remains working safely, as that is the first and most important step to working efficiently and ultimately achieving success in the marketplace. Where your safety incident rates are some of the lowest in the country but we strive for 0 injuries. In addition to discussing our strong performance in the third quarter, I also wanted to give you an update on our Blue Creek growth project. You can refer to Slides 13 through 16 of our quarterly investor presentation on our website. As previously stated, Blue Creek is one of the few remaining untapped reserves of premium high vol A met coal in the United States. We are excited by the promising results from our early work, and believe Blue Creek has the potential to deliver significant value to our stockholders. Our initial work has focused on the feasibility of a single longwall operation with annual production of approximately 3 million short tons with a potential mine life of 40 to 60 years. While we continue to refine project parameters in 2019, our initial studies have demonstrated robust returns across the range of met coal prices. These initial studies estimate capital expenditures of approximately $550 million to $600 million over 5 years. Warrior continues to pursue several activities to maintain project momentum and optimize Blue Creek's project parameters. These activities include additional core hole drilling to gather geological and marketing data; evaluating strategic rail and barge transportation partnerships; and obtaining permits for slurry storage and course refuse areas. We are currently working with several vendors to finalize construction plans to ensure that the development plans are solid. We are also considering allowing for the full potential of 2 longwalls, which would mean annual production of up to approximately 6 million short tons, if desired. Additionally, we plan to continue to explore potential offtake arrangements as well as project financing alternatives. We expect Blue Creek will be fully permitted and shovel-ready by early 2020, at which point Warrior would be in a position to make a decision on future development. We're extremely excited by the potential we see at Blue Creek, and believe the project's become the cornerstone of our future portfolio. We look forward to providing updates to our stockholders over the next few months. I'll now ask Dale to address our third quarter results in greater detail.

Thanks, Walt. For the third quarter of 2019, net income on a GAAP basis was $45 million or $0.87 per diluted share compared to net income of $53 million or $1 per diluted share in the third quarter of 2018. Excluding the nonrecurring other income, non-GAAP adjusted net income for the third quarter of 2019 was $41 million or $0.79 per diluted share compared to $1.06 per diluted share in the third quarter of 2018. Adjusted EBITDA was $83 million in the third quarter as compared to adjusted EBITDA of $94 million in the same period of 2018. The quarterly decrease was primarily driven by an 11% decrease in average net selling prices, and slightly higher power and maintenance cost and higher stock compensation expenses over the same period last year, partially offset by a 19% increase in sales volumes. The company's adjusted EBITDA margin was 29% in the third quarter compared to 34% in the third quarter of 2018. Total revenues were $288 million in the third quarter of 2019 compared to $273 million in the same period last year. This increase was primarily due to the 19% increase in sales volumes. The average net selling price per short ton decreased approximately 11% in the third quarter compared to the same period in 2018. Index prices dropped significantly during the third quarter. Our gross price realization was 102% in the third quarter of this year. Demurrage and other charges reduced our gross price realization to an average net selling price of $141 per short ton in the third quarter of 2019 compared to $159 in the same period last year. Mining cash cost of sales, FOB port, was $189 million or 67% of mining revenues in the third quarter compared to $166 million or 63% of mining revenues in the third quarter of 2018. Cash cost of sales per short ton, FOB port, was approximately $95 in the third quarter compared to $100 in the same period of 2018. The decrease is primarily due to the 19% higher production volumes reflecting the benefits of our capital investments. SG&A expenses were about $9 million or approximately 3% of total revenues in the third quarter compared to approximately $7 million in the prior year period. Expenses were higher primarily due to higher stock compensation expenses recorded this year over last year. Depreciation and depletion expenses for the third quarter of 2019 were $26 million or 9% of total revenues and were flat compared to the same period of 2018. Net interest expense was about $7 million in the third quarter and included interest on our outstanding debt plus amortization of our debt issuance cost associated with our credit facilities, partially offset by interest income. This amount was lower by $3 million compared to the same period last year due to the early retirement of a portion of our debt in the first quarter of 2019. Other income of approximately $5 million was recorded in the third quarter of 2019 due to unexpected proceeds received from a settlement with one of our predecessors, Walter Energy Canada, and its affiliates in their bankruptcy proceeds for outstanding claims. The company recorded noncash income tax expense of $8 million during the third quarter of 2019, and 0 expense in the same period last year. This result primarily reflects the utilization of our net operating losses, or NOLs, with a corresponding decrease in deferred income taxes reflected on our balance sheet. As you may recall, we released the valuation allowance on deferred income taxes associated with the company's NOLs in the fourth quarter of 2018. We paid no cash taxes in the third quarters of 2019 and 2018 and continue to expect that the utilization of our NOLs will reduce our federal and state income tax liability to 0 until the NOLs are fully utilized or expired. We expect this will continue to drive significant free cash flow conversion over the next several years. Turning to cash flow. During the third quarter, the company generated $118 million of free cash flow, which was a result of cash flows provided by operating activities of $150 million plus cash used for capital expenditures and mine development cost of $33 million. This, compared to $78 million of free cash flow in the third quarter of 2018. This stronger result was primarily due to the near record high quarterly sales volumes, offset by low -- lower average net selling prices and a decrease in working capital of $67 million in the third quarter this year. The decrease in working capital was primarily due to $52 million of lower accounts receivable. Cash used in investing activities for capital expenditures and mine development cost was $33 million in the third quarter of 2019 compared to $24 million in the same period last year. This year's third quarter results included $6 million of mine forward development cost related to a continuous miner unit and support costs that were incurred in developing new longwall panels in the 4 North area. Cash flows used in financing activities were $19 million in the third quarter of 2019, and primarily consisted of repurchases of the company stock of $11 million through payment of a quarterly dividend of $3 million plus repayments of capital lease obligations of $5 million. The company's balance sheet remains strong with a leverage ratio of 0.26x adjusted EBITDA. In addition, we have ample liquidity with total available liquidity as of the end of the third quarter of $335 million consisting of cash and cash equivalents and short-term investments of $219 million and $116 million available under our ABL facility. This is net of outstanding letters of credit of approximately $9 million. We believe our strong balance sheet and significant free cash flow generation will provide us with flexibility if we decide to pursue our Blue Creek development project next year. In summary, the third quarter reflected strong operational performance that drove a 19% increase in quarterly sales and production volumes, strong free cash flow generation and overall strong financial performance. This strong performance was offset by lower market pricing. Now turning to our outlook and guidance for the remainder of 2019. We expect to complete 1 more longwall move in the fourth quarter for a total of 5 longwall moves in 2019 compared to a total of 3 moves we had in 2018. We are reaffirming our guidance for the full year 2019 as previously issued during our second quarter call. As set out in our press release, our full year 2019 guidance is as follows: wholesales of 7.5 million to 7.9 million short tons; full production of 7.5 million to 7.9 million short tons; cash cost of sales FOB port of $89 to $95 per short ton; capital expenditures of $100 million to $120 million; mine development cost of $18 million to $22 million; SG&A expenses of $32 million to $36 million; interest expense net of $30 million to $32 million; noncash deferred income tax expense of 20% to 23%; and a cash tax rate of 0%. I'll now turn it back to Walt for his final comments.

Thanks, Dale. Before we move on to Q&A, I'd like to make a few more comments about the company and its outlook for the fourth quarter. We're very pleased with the company's strong operational and financial performance in the third quarter of 2019, and we appreciate the support and engagement we have received from our stockholders and, of course, our employees. Based on regular feedback from our customers, we expect our contracted sales volumes to remain fairly consistent in the fourth quarter. We expect that any spot opportunities in the market will be mainly concentrated in Asia. We believe global steel producers will continue to be pressured by thin margins due to low steel prices and high iron ore input prices despite the recent correction in met coal prices. For these reasons, we remain cautious on the fourth quarter market conditions, and anticipate that pricing volatility will continue to impact the markets until the current Chinese port restrictions ease and trading activity resumes for 2020 deliveries. However, after considering the expected market conditions for the remainder of the year, along with our strong performance year-to-date, we are reaffirming our 2019 guidance targets. More specifically, based on these inputs, we expect our fourth quarter sales and production volumes to be the lowest of the year but still at the high end of our guidance targets if everything goes well. Let me give you a bit more color on the expectation for sales and production volumes in the fourth quarter. We purposely ran the operations especially hard in the first 9 months of this year to capture the maximum profitability and free cash flow during peak periods of met coal pricing. As a result, as the fourth quarter normally contains more days off for holiday periods, we expect to take advantage of the market conditions to allocate additional days to performing routine downtime maintenance on key equipment as well as completing 1 more 10-day longwall move. During these production outages, we expect our inventory levels to decrease. Finally, I hope you'll agree that our performance this year reflects our often repeated mantra, we run the business as if the next pricing downturn and the geologic issue were just around the corner, with conservative targets and flexible operations that allow us to adjust to the market environment as it changes throughout the year. With that, we'd like to open the call for questions. Operator?

[Operator Instructions]. Today's first question comes from David Gagliano of BMO Capital.

I think while you might -- you hit -- you just hit it -- one of them at the end there. But -- so in terms of that quarter-over-quarter decline, obviously, pretty steep for the fourth quarter in terms of production and shipments, it sounds like it's seasonal plus market conditions. As you look to 2020, any reason to expect volumes not to be back into that 2 million ton per quarter zone that we've seen lately?

Well, we're still building our budget for next year, so it'd be premature for me to announce what our production targets are for next year and what we think we'll do quarter-on-quarter. We're still putting that together, so I really don't want to comment on that right now, David, I'm sorry.

Okay. Understood. Anything in terms of extraordinary downtime or conditions at the mine, other than, I guess -- well, you called it normal routine maintenance. But again, it does seem like a pretty significant -- obviously, it is a very significant quarter-over-quarter drop. So I'm just wondering if you can give a little more color on...

Sure. One of the things -- I'm sorry. One of the things that's happening is we do have the longwall move of mine for this year. We didn't know we would -- if we would be able to get the additional set of shields when we budgeted for this year at the beginning for Mine 7. We just didn't even know if we'd get delivery in time. And when we did, we were able to reduce those longwall moves at Mine 7 down to very short moves, basically 1- or 2-day longwall moves, just walking from one phase to the other. So cutting up 4 longwall moves with several hundred thousand tons of additional production for the year. The Mine 4 move does not have that same opportunity. So that will be a full-blown move, and it'll cost us well over 100,000 tons. We intend to do some work on some of the infrastructure like on our skips that will require us to run at a much lower rate for a period of time. So it's just things like that. And again, what we've done is we've pushed these mines pretty hard all year. There's really nothing wrong. You see some work we really want to get done to set ourselves up for success going forward.

And our next question today comes from Daniel Scott of Clarksons.

Let me follow-up on David's question on a very solid quarter. You did 2.2 million tons with two longwall moves in the quarter with, I imagine, summer vacations and whatnot. Does that signal a -- kind of a new run rate potential for Mines 4 and 7? Or is there something that we should think about that would prevent that?

Well, again, we really didn't have two longwall moves -- full-blown longwall moves because of the extra set of shields, and that will not continue indefinitely into the future. Because what we have is we have 3 different sets of shields for Mine 7: one is for relatively low seam; one is for relatively high seam; and one set can operate in either. And it all depends on where we're moving the longwalls to on their following panel, whether or not we'll be able to do zero-day longwall moves. So you can't just assume that everything at Mine 7 will be zero-day moves going forward. And again, I think what we did was we pushed pretty hard, all year long. Now we've got some holidays coming up, and we know that we've got some things we'd like to get done. So we intend to get those done, and we'll run the mines as hard as we think is practical in the fourth quarter. So I think that's the way we plan on doing.

All right. Very helpful. And when I think about inventories, you did 2.2 million produced, 2 million sold, I'm not sure where you're at exactly right now, but I think it's about 600,000 tons of inventories. Pretty sure you said a couple of quarters ago that 300 roughly was ideal. Is there -- is that kind of just market weakness? Is that -- set you up for -- to help you on fourth quarter sales versus production? Where do you see yourselves by end of year?

Well, I think -- if I said three, it's probably -- 3 to 4 is probably a more realistic expectation. And I think we do have the -- we have the inventory going into the fourth quarter that allows us to do a little bit of work at the coal mines and still have the coal sales. We did have strong sales in the third quarter. I don't think we anticipated the -- quite the production performance that we did achieve, so we're very pleased with both. But I think it gives us the opportunity to do a little more work in the fourth quarter and sell down the inventory. It wasn't about market weakness. Our customers took their coal. We actually -- our customers performed very well for us.

Okay. Great. And then just real quick, a follow-up here. When I think about your comments on the Blue Creek and one longwall, could be a second longwall, can you kind of compare that to what the reserve life is, not just for your SEC filings but the -- in the reality for Mines 4 and 7 and kind of how that could layer what your production outlook could be in a high-commodity environment over the next 5, 10 years?

Well, mine lives for Mine 4 is well over 20 years, 25 years. Mine 7, let's drop that down a little bit, closer to 20, maybe a little less than that, somewhere in there. One longwall that's probably a 40- to 60-year reserve at Blue Creek. Two longwalls would -- basically, by the time you put one in, it wouldn't cut it in half, but it had probably dropped it to 30 years or so. And again, if you look at us, and we look at capacity of all three operations running together with a single longwall, I'd say you need to say you're in the 10-plus range. A two longwall, you'd expect to be in the -- I don't know, 12 to 13 range, something like that.

Our next question comes from Chris Terry of Deutsche Bank.

A couple of questions from me. Just following on Blue Creek maybe as a starting point. Is the decision on how you look at that project early next year and the size of it, just completely determined on sort of a bottom-up approach on how you see the economics? Or is it somewhat market-driven as well?

Well, I think it's both, but I think we started bottoms up. But it -- we looked at it from a long -- what do we view as a long-term pricing for high vol A coal because that's the type of coal that will be produced there. So we're doing a bottom's up. But naturally, we're keeping in consideration with the high vol A, what we believe will be the high-volume market going forward for the next 10, 20 years.

Okay. And then just in terms of the shelf registration that came through, is that just routine practice of renewing that? I wondered if you could just give some comments.

Yes. That was just routine maintenance or housekeeping really. The S-3 that we had out there before only allowed us to do the block trades, where we had to provide with equity investors before. So this is really just housekeeping that had given us a broad, universal shelf out there. So that if we wanted to access the capital market sometime in the future, it just gives us a quicker time to market at a little bit lower cost. And plus, we're already a weekly filer, so that goes effective immediately. And it wouldn't delay because of some SEC review in the future. So just really housekeeping.

Okay. And the last one for me, just in terms of the overall market, I appreciate you don't sell that much into Asia. But just looking at the import restrictions in China as a key clearing event for the overall market, any view on when we might get some more resolution on that? Is it next year? Early next year? Or do you think that could happen by the end of the year? Just any comments on the market.

Well, I think it'll be -- our expectation is it will be early next year. In the first quarter next year, we'll have more clarity. I think from now to the end of the year, it wouldn't surprise -- be surprising if they just stayed as tight, if not tighter.

[Operator Instructions]. Today's next question comes from Lucas Pipes of B. Riley FBR.

Walt, just a quick follow-up on Q4. I thought I heard you say that you would be towards the higher end of guidance. Does -- is that for both production and sales?

Yes, I would expect that. And frankly, if prices were still $200 a ton, we'd be running these mines as hard as we could as we did the first 9 months of the year. It's just what we see as a lull in the met coal pricing gives us the opportunity to also take advantage of that. And from our perspective, get our mines ready for next year and be ready to continue to run them as the opportunity presents itself and the strong market presents itself.

That's very helpful. So I think on the sales side, the high end would be about 1.6 million tons, and on the production side, 1.2 million tons. So those are kind of edging up on those as maybe a good place to be in the model?

Yes, I would assume so.

That's very helpful. And then kind of a bigger strategy question as it relates to Blue Creek. How do you think about kind of build versus buy? The valuations in the sector are pretty -- continue to be pretty undemanding, and that's maybe euphemism. How do you think about allocating capital towards an inherently more risky development process than buying back your stock? Or buying another mine that's already out there producing? How do you think about this in this context?

Well, I think we just look at it overall. I mean if you look at the returns, when you look at our stock price, and you just look across the sector, right, we've tended to focus more on special dividends, even though we're doing a little bit of both special as well as buybacks. Others are focused on -- strictly on buybacks. Well, those buybacks haven't really worked. I think you would look at some of those other coal companies and say, "Well, the price is down 40%, 60%. So is the buyback really working?" So we don't see -- this sector doesn't seem to be getting rewarded for some of the things we're doing. And I can't focus on what others are doing. But we're performing, and we continue to perform. Yet we trade at such a low valuation. So I think we continually look at that at capital allocation. And while, yes, there is risk in starting and developing a project that takes 5 years to construct and spend $600 million. That's a huge growth opportunity, and the returns are pretty large there. We provide that information on the NPV, that's almost $850 million on that project at a 24% IRR. And that's in a $150 price environment, basically where we are today. So yes -- well, I mean, we are just kind of looking at all those, and we kind of try to balance all those different options. But as we've said in the fore -- before, the acquisition opportunities are probably less for us. Just because of the high-quality coal that we have. There's not a lot of opportunities to go out there and get that type of add-on, and you have to compare that to Blue Creek because the return profile is just so high there.

That's very, very helpful color. I appreciate that. And I'll sneak one last one in, kind of going back to the broader market. I think 3 months ago, you said you wouldn't be selling any spot shipments to Europe in the second half of the year. And I'm wondering, what are you seeing in the different regions? Is Europe, Brazil still pretty weak? Is Asia holding up well, ex China? What are you kind of -- what's your feel in terms of demand from end customers by region? Would be very much appreciated.

Well, I think as I said in my comments, we saw weakness everywhere, really, except China. Any spot sales that we did have that we would normally have, we saw those tons move into Asia in the third quarter and expect the same to continue into the fourth quarter. What we see in Europe is some just general weakness. We see some signs of things changing a little bit, maybe strengthening here and there. I think the automotive sector may be picking back up a bit. But I think our expectation is for next year that we'll continue to see performance about where we did this year for most regions.

And our next question today is a follow-up from Daniel Scott at Clarksons.

Real quick, just to nail you down from what you said a couple of minutes ago there on capital returns. You guys have clearly gone the special dividend route. Your stock has outperformed your peers. And when we think about moving forward with Blue Creek, whether it's $600 million or whether it's a lower number, can you speak to -- understanding that the Board has final say, but that -- you would continue that capital return program during the construction of Blue Creek?

Well, at this point, nothing has changed in our policy as we've been working that policy in the past. And if we were to make that decision to move forward with Blue Creek, right now, we don't expect that policy to change. Now if it does, we would announce that at that time. But clearly, we understand that a lot of our investors prefer the cash special dividends, and there is a group of people or investors also that like the buybacks. And then there's a group that kind of looks -- likes the growth opportunity. So we're going to use all the tools in our tool belt to satisfy our stockholders. So no, we're not going to turn off the capital returns, but I don't have a set percentage to give you or anything like that, other than to say, we're sticking to our current capital allocation policy. And to the extent there's excess cash, we will be returning that to shareholders in various forms.

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

That concludes our call this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal.

Thank you, sir. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.