NACCO Industries — Second Quarter 2026 Earnings Summary

Financial Performance

• Consolidated revenues increased 6% year-over-year to $72.3 million for the quarter ended June 30, 2026, compared to $68.2 million in the prior year period.
• Gross profit improved 123% year-over-year to $15.2 million, up from $6.8 million in Q2 2025.
• Operating loss was $2.3 million for the quarter, including $12.0 million in asset impairment charges related to solar projects; excluding these charges, operating results decreased moderately from Q1 2026.
• Net loss was $1.0 million ($0.13 per diluted share) compared to net income of $3.3 million ($0.44 per diluted share) in Q2 2025.
• Consolidated Adjusted EBITDA increased 72% year-over-year to $15.9 million, down 3% sequentially from $16.4 million in Q1 2026.
• Outstanding debt stood at $120.1 million as of June 30, 2026, with total liquidity of $114.6 million ($45.5 million cash and $69.1 million available under the revolving credit facility).

Guidance and Future Outlook

• Full-year 2026 Consolidated Adjusted EBITDA is expected to improve year-over-year, excluding solar impairment charges and a $7.8 million pre-tax pension settlement charge recorded in 2025.
• Growth in Consolidated Adjusted EBITDA is expected to moderate in the second half of 2026 relative to the first half and prior-year periods.
• Second-half consolidated operating profit and net income are expected to decline from first-half 2026 and prior-year levels due to potential additional solar project curtailment costs and expected inventory write-downs at Mississippi Lignite Mining Company.
• Full-year 2026 operating profit and net income are expected to be significantly lower than 2025 due to realized and anticipated charges.
• At the Utility Coal Mining segment, full-year customer demand is expected to be comparable to 2026, with operating profit expected to increase year-over-year; however, demand is expected to decline modestly in the second half of 2026.
• Contract Mining operating profit and Segment Adjusted EBITDA are anticipated to show substantial year-over-year growth for the second half and full year of 2026, though results are expected to moderate in the second half due to projected demand declines, primarily in the fourth quarter.
• Significant operating profit improvement is expected in Contract Mining in 2027 driven by a full year of the Palm Beach County dragline services contract and contributions from the Arizona quarry.
• Minerals and Royalties operating profit and Segment Adjusted EBITDA are projected to decline compared to the first half of 2026 and the second half/full year of 2025 due to production declines and changing activity mixes, though meaningful earnings are expected to continue in 2027 with moderate operating profit.
• Mitigation Resources is expected to generate a profit in 2027 and move toward more consistent results as its portfolio matures.
• The company anticipates investing up to $35 million in the remainder of 2026 for business development opportunities meeting disciplined capital criteria.
• Cash flow before financing is projected to remain a use of cash in 2026 but is expected to improve modestly over 2025 and continue improving into 2027.

Business Segments and Product Lines

• Utility Coal Mining: Revenues decreased 25% year-over-year to $21.5 million due to operational issues at Mississippi Lignite Mining Company's customer's power plant reducing consolidated tons delivered (5,553 thousand tons vs. 4,626 thousand tons in Q2 2025). Operating profit improved to $6.3 million from $1.2 million, and Segment Adjusted EBITDA rose to $8.7 million from $3.4 million, driven by improved Mississippi Lignite results, increased earnings from unconsolidated operations, and decreased operating expenses.
• Contract Mining: Total revenues increased 20% to $36.9 million, with revenues excluding reimbursable costs up 34% to $16.4 million. Tons delivered rose to 16.0 million from 13.9 million. Operating profit increased to $3.8 million from $1.0 million, and Segment Adjusted EBITDA rose to $6.3 million from $3.9 million. Growth was driven by the commencement and ramp-up of a new dragline services contract and increased customer requirements at limestone mining operations.
• Minerals and Royalties: Revenues increased to $10.6 million from $7.3 million, driven by a 46% increase in royalty revenues due to higher oil prices and favorable pricing adjustments. Operating profit rose to $6.7 million from $5.2 million, and Segment Adjusted EBITDA increased to $7.7 million from $6.1 million. These gains were partially offset by lower earnings from an equity investment.
• Unallocated Items: Revenues increased to $3.3 million from $1.6 million due to higher restoration and reclamation service revenue at Mitigation Resources. Operating loss widened to $19.1 million due to $12.0 million in impairment charges for solar development projects within ReGen Resources. Excluding impairments, operating loss and Segment Adjusted EBITDA improved moderately year-over-year.

Market and Competitive Landscape

• The company leverages a portfolio of long-term contracts and relationships in natural resources, including coal mining, aggregates, minerals, and environmental solutions.
• Recent policy developments, including the re-establishment of the National Coal Council, reinforce the strategic role of coal in supporting grid reliability, economic competitiveness, and national security.
• Sawtooth Mining, a subsidiary, provides exclusive comprehensive mining services at Thacker Pass for a joint venture led by Lithium Americas Corp., supplying all lithium-bearing ore requirements for a processing facility targeted for full production in 2028.
• The company maintains a conservative approach to capital structure and operating discipline to minimize risk while pursuing opportunities with longer-term horizons.

Risks and Challenges

• Potential additional curtailment costs could be incurred depending on the outcome of activities to monetize solar investments and reduce exposure.
• Expected inventory write-downs at Mississippi Lignite Mining Company and potential additional solar project curtailment costs are expected to negatively impact second-half 2026 operating profit and net income.
• Risks include significant reductions in customer demand from extended power plant outages, weather conditions, or other events; customer liquidity constraints; changes in hydrocarbon prices; contract terminations or defaults; and supply chain disruptions.
• Regulatory changes affecting fossil fuels, tax laws, environmental legislation, and changes in mining or power plant emission regulations pose potential risks.
• Equipment problems, geological conditions, and workforce availability are cited as operational risks.

Management Commentary and Tone

• J.C. Butler, President and CEO, stated that NACCO delivered significant year-over-year improvement in gross profit and Adjusted EBITDA, with underlying momentum across segments remaining strong in the first half of 2026 despite solar impairment charges.
• Management expressed confidence in the trajectory into 2027, citing growth opportunities and disciplined capital criteria, while noting that operating performance is expected to moderate in the second half.
• The company remains committed to strengthening its balance sheet, executing its business plan, and creating long-term value for shareholders through reinvestment or direct returns.

Other Key Points

• The company recorded a $12.0 million asset impairment charge in the Unallocated segment related to certain solar development projects within ReGen Resources.
• A $7.8 million pre-tax pension settlement charge was recorded in 2025, which is excluded from the full-year 2026 Adjusted EBITDA outlook.
• A $6.0 million after-tax pension settlement charge was recognized in the second half of 2025, affecting prior-year comparisons.
• The company hosts a conference call on August 6, 2026, at 8:30 a.m. Eastern Time to discuss results.
• The company anticipates commencing operations at a new limestone quarry in Arizona during the fourth quarter of 2026.
• Earnings at unconsolidated mining operations are expected to decline in the second half of 2026 primarily due to the conclusion of reclamation services at Sabine Mining Company as of September 30, 2026.