Key Points
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Q3 operating results improved:Operating profit rose 37% to $9.3 million and adjusted EBITDA climbed 63% to $20.4 million, despite $3.4 million in solar-related costs. Net income fell to $10.9 million, mainly because of higher income tax expense.
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Mining operations drove growth:Contract mining profit increased as a Florida dragline contract ramped up, while utility coal also improved. NACCO expects substantial contract-mining growth in Q4 and 2026, and anticipates improved overall profitability in 2027.
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Solar reassessment and investment plans:NACCO is exploring sales or other transactions for solar projects after recording about $15 million in impairment and curtailment costs through Q3. It expects to invest up to $32 million for the rest of 2026 and up to $56 million in 2027.
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NACCO Industries (NYSE:NC) reported higher third-quarter operating profit and adjusted EBITDA as growth in its utility coal and contract mining businesses outweighed $3.4 million in costs related to the curtailment of solar development activities.
Operating profit rose 37% from a year earlier to $9.3 million, while consolidated adjusted EBITDA increased 63% to $20.4 million. Adjusted EBITDA also rose 28% from the second quarter. Gross profit increased 18% to $11.8 million.
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Net income fell to $10.9 million, or $1.44 per diluted share, from $13.3 million, or $1.78 per diluted share, a year earlier. Senior Vice President and Controller Elizabeth Loveman said income tax expense increased substantially, primarily because of a change in the estimated annual effective tax rate and a resulting year-to-date adjustment.
Income before taxes rose to $12.5 million from $6 million, aided by higher operating profit and a $4.5 million gain from settling an excess pension funding liability with former customer Sabine Mining Company.
Mining contracts drive growth
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Contract mining operating profit climbed to $4.9 million from $1.9 million, while segment adjusted EBITDA rose to $7.6 million from $4.7 million. Revenue excluding reimbursable costs increased 75%, reflecting the ramp-up of a dragline services contract in Palm Beach County, Florida.
Loveman said the Florida contract more than offset lower customer requirements at limestone operations. NACCO expects substantial year-over-year growth in contract mining operating profit and adjusted EBITDA in the fourth quarter and for full-year 2026, followed by further operating profit growth in 2027.
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President and CEO J.C. Butler said the company began work in October under a new dragline mining services contract at an Arizona limestone quarry. The agreement extends for more than a decade. Butler also said a fourth dragline is expected to begin operating at the Palm Beach site in the next few months.
Butler noted temporary production slowdowns at some customer quarries and some softness in Florida, where most of NACCO's contract mining operations are located. He said customers were not indicating that they expected a major economic downturn.
At the Thacker Pass lithium project, NACCO expects to invest approximately $16 million in mining equipment in 2027. Butler said customer Lithium Americas is targeting mechanical completion of the project's first-phase processing plant in late 2027, with a ramp-up to commercial production through 2028. Under NACCO's contract, the customer is obligated to reimburse the equipment investment over five years, beginning the year after it is made.
Coal and royalties outlook
Utility coal mining operating profit increased to $6.6 million from $5 million, and adjusted EBITDA rose to $8.9 million from $7.1 million. Loveman attributed the improvement to better contractual pricing and lower inventory impairment charges at Mississippi Lignite Mining Company.
Butler said operations at a customer's power plant became more consistent during the quarter and collections of outstanding receivables improved. Payments remain less than fully current, however, and NACCO continues to monitor the plant because its performance affects the customer's liquidity.
The company expects fourth-quarter utility coal operating results to decline from a year earlier because of lower anticipated customer demand, higher diesel costs and reduced contributions from unconsolidated operations. NACCO stopped receiving Sabine reclamation fees after the mine's owner assumed responsibility for the final stages of reclamation on October 1.
For 2027, NACCO expects overall coal demand to remain consistent with 2026 and profitability to improve. Butler said expected growth at Coteau and Falkirk should largely offset the loss of Sabine reclamation income.
Minerals and royalties operating profit was $7.7 million, with adjusted EBITDA of $8.7 million, both generally comparable with a year earlier. Higher earnings from the company's Eiger Resources investment largely offset lower royalty revenue associated primarily with natural gas production and pricing. NACCO expects the segment's operating profit to moderate in 2027 from 2026 levels.
Solar costs and investment plans
NACCO is evaluating potential sales, contract amendments and other transactions for solar projects after reassessing certain investments. The company recognized approximately $15 million in solar-related impairment and curtailment costs through the first three quarters of 2026.
Loveman said the third-quarter $3.4 million expense related to the termination of a power purchase agreement in October. The expense was recognized as a payable at September 30, and Loveman said it would add $3.4 million to outstanding revolving credit debt in the fourth quarter.
Butler said the company is seeking to limit its exposure while exploring ways to monetize the projects, potentially retaining some passive upside. He declined to provide a range for the potential outcome and said the process could take a year or longer. Loveman said the company's 2026 and 2027 outlook includes its current best estimate of how the situation will play out.
NACCO expects to invest up to $32 million during the remainder of 2026 and up to $56 million in 2027. Each figure includes a $20 million annual budget for minerals and royalty growth investments; the 2027 estimate also includes the $16 million for Sawtooth equipment.
The company ended the quarter with $124.8 million in debt and $115.2 million in liquidity, including $56.5 million in cash. It expects full-year 2026 adjusted EBITDA to increase substantially and operating profit to be comparable with 2025, while forecasting meaningful improvements in operating profit, net income and consolidated EBITDA in 2027.
About NACCO Industries (NYSE:NC)
NACCO Industries, Inc is a natural resources company that provides mining and natural resource development services primarily in the United States. Through its subsidiaries, the company operates in coal mining, aggregates and minerals management, serving customers in the power generation, industrial and construction sectors.
Its principal business is conducted through The North American Coal Corporation, which develops and operates surface coal mines under long-term contracts for electric utilities and industrial customers.
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