Natural Resources Q3 2026 Earnings Call Transcript

Natural Resources (NYSE:NRP) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://events.q4inc.com/attendee/233500581

Summary

Natural Resource Partners generated $45 million in free cash flow for Q3 2026, with a total of $166 million over the past 12 months before the soda ash business investment.

The company is significantly increasing its distribution, with $32 million, or $2.34 per unit, available for distribution after debt repayment.

The Mineral Rights segment remains a strong cash generator with $47 million in free cash flow for the quarter, despite weak global steel demand and stable coal prices.

The soda ash market is oversupplied, with decreased prices; Şişecam Wyoming remains a low-cost operation, allowing it to withstand market downturns.

Net income for the quarter was $27 million, with improvements in corporate and financing results due to lower debt and interest costs.

The company has repaid its remaining $13 million OpCo credit facility and increased its distribution to $2.34 per common unit for Q3 2026.

Full Transcript

OPERATOR

We will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Tiffany Sammis, Investor Relations. Tiffany, please go ahead.

Tiffany Sammis (Investor Relations)

Thank you. Good morning and welcome to the Natural Resource Partners third quarter 2026 conference call. Today’s call is being webcast and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer, Chris Zolas, Chief Financial Officer and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP’s views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP’s Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our third quarter press release which can be found on our website. I would like to remind everyone that we do not intend to discuss the operations or outlook for any particular coal lessee or detailed market fundamentals. Now I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer.

Craig Nunez (President)

Thank you, Tiffany. Good morning, everyone. NRP generated $45 million of free cash flow in the third quarter of 2026 and $166 million of free cash flow over the last 12 months before the investment in our soda ash business earlier this year. Last quarter I said that, barring something unforeseen, we intended to raise distributions significantly in November. We are delivering on that. A decade of work to pay down debt and de-risk the partnership has brought us to the point where we can pay out free cash flow beyond the unitholder tax liability.

We generated $45 million of free cash in the quarter. We paid down $13 million of debt, leaving $32 million, or $2.34 per unit, available to distribute. Our free cash flow can move around a lot from quarter to quarter and year to year. Our board will decide on distributions each quarter, weighing our results, our liquidity needs and other uses of cash, which could include unit repurchases or opportunistic acquisitions. If the board decides to retain cash rather than pay it out, we will hold ourselves to the same test as always: more than a dollar of intrinsic value per unit for every dollar we keep.

Last quarter I said our Mineral Rights segment was our most dependable cash generator. It delivered again this quarter, producing $47 million of free cash flow and $185 million over the last 12 months. Spot prices for metallurgical coal bumped up modestly in the quarter before pulling back. Global steel demand remains weak, and that keeps a lid on prices. Similar story with thermal coal. Natural gas is cheap, power plants are sitting on plenty of coal, and we do not see anything on the horizon to change that.

The geopolitical backdrop remains bumpy, and diesel is up more than 75% this year, which raises costs all along the supply chain and squeezes operator margins. For 2027, nothing we are watching points to a material change in coal pricing. If geopolitical conflicts drag on, prices can move in either direction, and I will not pretend to know which. Now to soda ash, the picture is the same as a quarter ago: too much supply, too little demand, and no quick fix. Increased natural soda ash exports from China are pushing older synthetic plants to modernize, shut down, or both. Producers are doing what you would expect: running plants at lower rates, shutting higher-cost capacity, cutting discretionary spending and hunting for efficiencies. International prices have stopped falling, but have settled at levels that are below the cost of production of most producers.

As we explained last quarter, domestic prices should move lower as contracts reset and the premium over international prices narrows. That will make 2027 harder than 2026. Closures are beginning to occur, however, but slowly. We continue to think rebalancing the market will take years, not quarters. Our investment in Şişecam Wyoming holds one of the lowest cost soda ash operations in the world, and low cost is what carries you through a downturn. Our managing partner continues to aggressively pursue cost savings while keeping operations safe and reliable and protecting the plant’s competitive position. This cycle may take years to turn, but we are confident in the quality of the asset and its ability to generate competitive returns when the market returns to balance.

So, to sum it up, Mineral Rights keeps generating strong free cash flow. We have $14 million of debt left to repay next month, and we are finally at the point where we can return the cash this business generates to you, our partners, subject to the board’s quarterly decision. With that, I’ll turn it over to Chris.

Chris Zolas (Chief Financial Officer and Treasurer)

Thank you, Craig. In the third quarter 2026, NRP generated $27 million of net income, $44 million of operating cash flow, and $45 million of free cash flow. Of these consolidated amounts, our Mineral Rights segment generated $37 million of net income, $46 million of operating cash flow, and $47 million of free cash flow. When compared to the prior-year third quarter, our Mineral Rights segment net income decreased $4 million primarily due to increased DDA expense.

Operating cash flow and free cash flow each increased $2 million as compared to the prior-year period primarily due to higher met coal pricing and volumes at certain properties and timing of payments, partially offset by lease amendment fees we received in the third quarter of last year. Regarding our met/thermal coal royalty mix, met coal made up approximately 70% of our coal royalty revenues and 45% of our coal royalty sales volumes for the third quarter of 2026.

For our soda ash segment, net income for the third quarter decreased $2 million compared to the prior-year quarter. This decrease was driven by lower sales prices due to the oversupplied international soda ash market and weakened demand for flat glass. Operating and free cash flow was flat when compared to the prior-year period due to not receiving a distribution in the third quarters of 2025 and 2026. NRP does not expect distributions from Şişecam Wyoming to resume until the soda ash market demand rebounds or there is a significant supply response to this depressed market.

Moving to our corporate and financing results, net income, operating cash flow and free cash flow for the third quarter of 2026 each improved $1 million as compared to the prior-year period. These improvements were due to lower debt resulting in lower interest costs and less cash paid for interest. Regarding our quarterly distributions, in August we paid the second quarter distribution of $0.75 per common unit. Also, during the third quarter this year, we fully repaid the remaining $13 million balance on our OpCo credit facility. As a result, and consistent with our communications throughout the year, the partnership increased the distribution to $2.34 per common unit with respect to the third quarter of 2026. In our recent earnings release we have included a reconciliation of this Q3 distribution amount from the operating cash flow we generated in the third quarter.

And with that, I’ll turn the call over to our operator for questions.

OPERATOR

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Robert Liu. Your line is open.

Please go ahead.

Robert Lahe (Independent investor)

Hi guys, this is Robert Lahe. I’m an independent investor at NRP for the last few years. I’m curious, you talked about the potential for share buybacks when you saw that the intrinsic value is below or above the current market price. I’m curious, would you be able to share your thoughts on that and where that might be?

Craig Nunez (President)

No, we will not give you guidance on what we think is the intrinsic value of our units. But thank you for your support.

Robert Lahe (Independent investor)

Yeah, thank you as well. Thank you for following through on what you said you’d do, and excited about the news today.

Craig Nunez (President)

You bet. Thank you.

OPERATOR

Your next question comes from the line of Stephen Balsam with Yellowgate Capital. Your line is open. Please go ahead.

Stephen Balsam

Hey, good morning, guys. I just wanted to say congratulations on reaching this point. Just wanted to say congratulations on reaching this point. It’s really rare to see such a long-term decision taken and made and followed through. It’s really been fantastic. Long-term shareholder and feels great to get to this point. I’d like to ask just one question regarding—

Craig Nunez (President)

Thank you for being with us for a long time and supporting us. Couldn’t have done it without all of our partners.

Stephen Balsam

You got it. I was hoping maybe you guys can comment a little bit on potential activities that you’re looking, whether it be carbon sequestration or any other sort of actions that are going on with respect to the various properties.

Craig Nunez (President)

I would tell you that our activities with respect to CO2 sequestration, solar, geothermal, all of the renewable-type activities that we look at, they’re not changing at all as a result of the change in our capital structure and the change in our cash allocation strategy, capital deployment strategy here. Now that we’ve paid off our debt, or are about to pay off all of our debt, there’s no changes to that. We’re attempting to maximize the acreage that we have, find lessees that are willing to come in and develop projects on our acreage for all the various types of initiatives.

And we’ve been doing that even before we reached this point with respect to our capital structure.

Stephen Balsam

Excellent. Love the approach and really happy with the approach taken on it thus far. And I realize there’s no statements made about future distributions. I like the way it was set out in the financials and being that variable distribution paid out of free cash flow. Feels great. Thanks again and congratulations again.

Craig Nunez (President)

Thank you so much. Appreciate it.

OPERATOR

There are no further questions at this time. I will now turn the call back to Craig Nunez for closing remarks.

Craig Nunez (President)

Thank you, operator. And again, thank all of you for your support over the years. We’re still on the journey, but being able to raise our distribution today and pay out a larger share of our free cash flow now that we have practically delevered the entire balance sheet—it was a joint effort, and we couldn’t have done it without you. So now we’ve got to look ahead and add value in the next period. So with that, thank you and have a great day.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.