American Resources First Quarter 2020 Earnings Report

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American Resources First Quarter 2020 Earnings Report

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American Resources (NASDAQ: AREC) on Wednesday,18th June 2020 announced its First Quarter financial results. Strategic steps were taken by the company in order to transform the company into an infrastructure company producing pure metallurgical carbon and enhancing the environment. First-quarter 2020 adjusted net loss was $4.26 million and EPS amounted $ 0.12 in comparison to a net loss of $9.89 million ($0.48 EPS) in the prior-year period.

Mark Jensen, Chairman and CEO of American Resources Corporation commented on the report, “The first three months of 2020 continued to be very productive in the transformation of the Company in becoming an infrastructure company and pure producer of metallurgical carbon. We continued to advance our efforts and position the company to be a stable, long-term supplier of metallurgical carbon to the worldwide steel markets to support growing global infrastructure demand while bringing a more efficient and modernised business model to the industry.”

First Quarter 2020 key Highlights

  • January 2020:– Company’s Environmental Social Governance (ESG) position advanced after setting up a partnership with Land Betterment Corporation. This corporation is an environmental solutions company which focuses on fostering positive impact through former coal mining sites. This will help in sustainable community development.
  • February 2020:- Restructuring of Perry county Resources i.e. Company’s fifth carbon processing and logistics complex was completed. The strategic plan to set up a next-generation operating model to eliminate philosophy of legacy costs, over-burdensome and streamlined operations was implemented so as to allow the complex to operate more effectively and efficiently.
  • March 2020:- Some non-core assets at Perry County Resources were divested in order to reduce the cost of complex’s holding and monetise assets which are not the part of the company’s 5-10 year operating plan.

 First Quarter 2020 Financial Results

  1. The company produced and sold 6538 tons of coal.
  2. Revenue earned for per ton of coal is 79.43
  3. The Total revenues amounted $524,334 in this quarter
  4. Cost of sales for this quarter was recorded at $1.86 million (353% of total revenue) in comparison to $6.64 million (95% of total revenue) of the previous year.
  5. The company earned adjusted EBITDA loss of $713,008 in first-quarter 2020 as compared to the adjusted EBITDA loss of $3.82 million for the previous year same quarter.
  6. The general and administrative expense was recorded at $842,925 (160% of total revenue), as compared to $1.37 of the first quarter of 2019.
  7. No income tax incurred by the company as it was able to utilize its available net operating losses carried forward from the previous year. Amounted approximately $ 13,746,391 as on 31st December 2019.

Profitability

The gross profit of the company was recorded at $(1.5) million and gross margin was recorded at -284.40%. The company has experienced a downfall in profit over the years. Total revenues of the company were recorded at $524,334 for this quarter. As per the quarterly reports, there was no surplus available with the company which could be utilised for future activities. There was a net loss of negative $ 3261368 recorded by the company. The company is focusing on developing rapidly as a leading infrastructure company. The net loss experienced by the company is less than the previous year with the help of its more efficient business operating models.

Even in this pandemic situation company believes that it will be able able to recover and earn well in future.

Response to Covid-19

  1. The company believes that ensuring the security of its employees is its upmost priority and further wants to utilise the time to increase the effectiveness of operations for the long term.
  2. Not wasting valuable resources is the main focus of the company. Thus during this massive disruption company focus on improving mine plans and advancing environmental reclamation.
  3. Through right-sizing operations and cost-cutting, the company is planning to manage its operations so as to deal with the current and future market conditions both domestically and internationally.

The company also stated in its reports that “It is making progress on multiple environmental projects and moving towards the bond release, which includes: –

  1. Completing significant reclamation and remediation at the Company’s Gold Star Mine, a thermal mine located in Greene County, Indiana that was idled in 2015.
  2. Completing reclamation and remediation efforts on several sites and permits throughout eastern Kentucky, which includes ongoing efforts by the Company to finalise the remaining outstanding environmental obligations.
  3. Submitting for bond releases as they come available due to reclamation efforts and post-mine land-use changes.”

Moving Forward

In the coming years, the company remains quite optimistic on the global infrastructure demand and it believes that the governments all over the world will focus on increasing infrastructure projects in order to stimulate economic activity as they recover from Covid-19 pandemic.

The company feels that it is in the position to fulfil a large part of the demand with the efforts and achievements made by them at PCR and McCoy Elkhorn complexes so as to be one of the lowest-cost producers of metallurgical carbon in the industry. This will also fulfil the need of employment in a region. The ESG efforts by the company will accelerate their development and would help in finding creative ways to contribute to the advancement of social and environmental issues faced by various regions

The company is currently facing loss but if we look from the future perspective then it will serve as a good option in this situation. As the economy will develop, the need for infrastructure company would rise and the company is ready to face this. The investors can take this as a good option considering the fact that the company can sustain in this pandemic and post-pandemic situation.

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