This article first appeared on GuruFocus .
Release Date: November 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Operating profit increased 37% to $9.3 million and consolidated EBITDA increased 63% year-over-year to $20.4 million.
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Contract mining operating profit increased to $4.9 million from $1.9 million, with revenues up 75% due to new contracts.
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Utility coal mining operating profit improved to $6.6 million from $5 million, driven by better pricing and lower impairment charges.
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New long-term contracts in Florida and Arizona are ramping up and expected to contribute significantly to future growth.
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Mitigation Resources has 13 projects and is expected to become a consistent profit contributor, with land value potentially understated on the balance sheet.
Negative Points
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Incurred $3.4 million in solar curtailment costs and may face additional costs in future years.
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Net income decreased to $10.9 million from $13.3 million year-over-year due to higher income tax expense.
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Minerals and royalties operating profit is expected to be below 2025 levels due to lower natural gas production and pricing.
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Loss of Sabine reclamation fees starting October 2026 will reduce utility coal mining earnings, only partially offset by other operations.
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Cash flow before financing is projected to be a use of cash for 2026, with debt of $124.8 million and total liquidity of $115.2 million.
Q & A Highlights
Q: On the coal segment, how large was the Sabine contract, and how much earnings will be lost now that it has transitioned? A: CEO JC Butler explained that Sabine was a decent contributor while actively mining, but as it moved into reclamation over the past two to three years, the fee dropped to a much smaller, more modest management fee. He said growth at Falkirk and Coteau is expected to offset the loss of Sabine reclamation fees.
Q: What is driving the expected growth at Coteau and Falkirk? A: CEO JC Butler said the management fee contracts combine volume and fees, with fees generally rising with CPI/PPI inflators. He added that 2027 is expected to be a year of pretty strong deliveries at both operations, largely because the customers are not planning major outages that year.
Q: How does diesel affect Mississippi Lignite Mining Company (MLMC), and is there a timing lag in cost recovery? A: Controller Elizabeth Lubman said diesel impacts expenses right away, but it enters the calculation of the sales price over a different time period, creating a mismatch between when diesel affects the sales price versus actual expenses. CEO JC Butler also noted that demand is driven by TVA's dispatch needs, with seasonality having a smaller effect as overall U.S. electricity demand rises.
Q: How is SG&A allocated between utility coal and contract mining, and how much flexibility would there be to reduce costs if MLMC is not renewed after 2032? A: CEO JC Butler said mine-site staff are charged to MLMC and Dallas-based support services are billed into the utility coal segment, while contract mining has its own SG&A. He emphasized a "one-team approach" with a system for allocating costs across businesses. On 2032, he said some mine-site staff would be needed during reclamation but would decline over time, while corporate staff in Cleveland and Dallas support a diverse and growing collection of businesses and will have plenty to do.
Q: Are the solar-related charges cash or non-cash, and what is the status of the solar projects? A: CEO JC Butler said the second-quarter impairment was largely non-cash, while the third-quarter charges were a combination of both. Controller Elizabeth Lubman specified that the $3.4 million expense related to termination of a power purchase agreement (PPA) in October 2026, recognized as an expense and payable at September 30, which will add $3.4 million to the revolver in Q4. Butler said the company now sees multiple paths forward, including monetizing projects rather than simply exiting, and aims to limit exposure while preserving potential upside.
Q: What is the timing and potential upside from the solar projects? A: CEO JC Butler said clarity will play out over the coming quarters and could extend a year or more, and the company will not rush the process. He declined to give a range, saying only that the outlook includes management's best estimate and that the outcome is "not a big number either direction."
Q: Contract mining guidance implies a fourth-quarter step-down despite the Arizona contract coming online. Is that conservatism or seasonal softness in Florida? A: CEO JC Butler said Palm Beach currently has three draglines operating, with a fourth expected up within a few months, and 2027 will benefit from a full year of Arizona operations. He attributed near-term softness to one-off, temporary issues at customer quarries, primarily in Florida, including a customer reducing on-site inventory, plus some uncertainty around the election and interest rates. He said no customers see a major economic downturn, and Florida is still growing, just not as fast as before.
Q: How does NACCO think about capital allocation, including share buybacks versus growth investment, as free cash flow inflects? A: CEO JC Butler said cash flow from operations less committed capitalthe $16 million for Sawtooth and maintenance capex within the $20 million maintenance-plus-growth budgetgenerates a lot of cash. He said the company will continue its dividend (paid since 1961), intends to strengthen the balance sheet, and then weighs share purchases against growth opportunities, with a primary focus on long-term earnings and cash flow growth with strong, stable customers. He added that leaders are looking for ways to be more capital efficient with growth dollars.
Q: What steps are planned next year to help the balance sheet? A: CEO JC Butler said the company is studying a whole range of items, including working capital and the capital intensity of each businesswhat should and should not be on the balance sheet. He said it is a study in the middle of being completed and declined to provide more color but sees interesting opportunities ahead.
Q: Can you frame the market value of land associated with Mitigation Resources and the timeline for realizing it? A: CEO JC Butler declined to give a number but explained the logic: mitigation banks are located in high-growth areas where demand for development is strong, and the company buys land in the same watershed at an attractive, opportunistic price. After improving streams and wetlands and placing conservation easements on relevant portions, the remaining land is available for sale, and its value should rise meaningfully as development advances. He said acreage and other sizing details have not been disclosed but could be discussed in the future.
Q: What is the outlook for utility coal mining in the fourth quarter and 2027? A: Controller Elizabeth Lubman said full-year 2026 utility coal operating profit is still expected to improve over last year, but fourth-quarter results are expected to be lower year over year due to anticipated reduced customer demand, higher diesel costs at MLMC, and lower contributions from unconsolidated operations after Sabine's reclamation transition on October 1. For 2027, overall coal demand is expected to be consistent with 2026 and profitability to improve, with more consistent power plant operation supporting MLMC and higher results at Coteau and Falkirk largely offsetting the absence of Sabine reclamation income.
Q: What is the consolidated outlook for the fourth quarter of 2026 and 2027? A: Controller Elizabeth Lubman said full-year 2026 operating profit is expected to be comparable with 2025 even with roughly $15 million of solar-related impairment and curtailment costs through the first three quarters, while income before income taxes and net income are expected to
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
