Why Alliance Resource Partners, L.P. drops for 9%

Sive Morten

Special Consultant to the FPA
Today Alliance Resource Partners (NASDAQ: ARLP) has dropped more than 9% at market’s open. According to the earnings schedule, the company has to provide the business society its earnings report for the IQ of 2021 before the market opens.

Alliance Resource is a diversified natural resource company that generates income from coal production and oil & gas mineral interests located in strategic producing regions across the United States.. Alliance is a master limited partnership with common units traded on the NASDAQ Global Select Market under the ticker “ARLP.”

According to company’s press release net income for the 2021 Quarter increased $169.5 million to $24.7 million, or $0.19 per basic and diluted limited partner unit, compared to a net loss of $144.8 million, or $(1.14) per basic and diluted limited partner unit, for the quarter ended March 31, 2020 (the "2020 Quarter"). Excluding the impact of $157.0 million of non-cash charges in the 2020 Quarter, Adjusted net income for the 2021 Quarter increased 102.5% to $24.7 million compared to $12.2 million for the 2020 Quarter.

Weather-related transportation disruptions and an unplanned customer plant outage impacted anticipated coal shipments during the 2021 Quarter, contributing to a 9.2% reduction in total revenues compared to the 2020 Quarter. Lower coal volumes and ongoing efficiency initiatives at our mining operations contributed to lower operating expenses of $196.5 million for the 2021 Quarter, compared to $234.3 million for the 2020 Quarter, largely offsetting lower total revenues.

As a result, Segment Adjusted EBITDA decreased slightly to $109.8 million in the 2021 Quarter compared to $111.7 million in the 2020 Quarter

Total revenues in the 2021 Quarter were $47.9 million lower
compared to the quarter ended December 31, 2020 (the "Sequential Quarter"), primarily due to lower coal sales volumes. Even though lower revenues were partially offset by decreased operating expenses and reduced depreciation, depletion and amortization, net income and EBITDA for the 2021 Quarter declined $10.3 million and $27.0 million, respectively, compared to the Sequential Quarter. (For a definition of EBITDA and related reconciliation to the comparable GAAP financial measure, please see the end of this release.)

ARLP also announced today that the Board of Directors of its general partner (the "Board") declared a cash distribution to unit holders of $0.10 per unit (an annualized rate of $0.40 per unit) for the 2021 Quarter, payable on May 14, 2021 to all unitholders of record as of the close of trading on May 7, 2021.

"ARLP’s financial performance during the 2021 Quarter was generally in line with our expectations, despite 950,000 tons of delayed shipments impacting EBITDA and cash flow by approximately $13.0 million," said Joseph W. Craft III, Chairman, President and Chief Executive Officer.

"We remain committed to our goal of creating long-term value for our unitholders and we continue to actively evaluate various other strategies and opportunities that will generate the attractive returns and sustainable cash flow growth needed to achieve that goal.”

Why ARLP shares drop?

As the US economy shows fast recovery after a pandemic collapse in 2020 and IQ earnings reports are the first rebound - the market widely expects strong numbers across the board. Investors were disappointed by recent Alliance Resources results as the market widely expects 0.23 EPS compares to 0.19 EPS value reported.

Besides, data shows decrease in revenues, operation earnings (EBITDA) that represents the core of the business of any company.