Alliance Resource Partners LP :ARLP-US: Earnings Analysis: Q4, 2016 By the Numbers : February 1, 2017

Alliance Resource Partners LP reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Alliance Resource Partners LP – Alliance Holdings GP, L.P. and CONSOL Energy Inc. (AHGP-US and CNX-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 527.40 million, Net Earnings of USD 99.61 million.
  • Gross margins widened from 20.44% to 27.27% compared to the same period last year, operating (EBITDA) margins now 39.09% from 34.42%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 527.4 552.07 439.15 412.83 542.15
Revenue Growth (%YOY) -2.72 -2.54 -27.38 -26.34 -8.23
Earnings (mil) 99.61 67.35 60.62 26.71 -13.13
Earnings Growth (%YOY) 858.74 49.04 7.61 -60.95 -115.01
Net Margin (%) 18.89 12.2 13.8 6.47 -2.42
EPS 1.3 0.91 0.82 0.36 -0.18
Return on Equity (%) 37.6 26.81 25.06 11.02 -5.15
Return on Assets (%) 17.96 11.68 10.24 4.52 -2.16

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Market Share Versus Profits

Revenues History
Earnings History

ARLP-US‘s change in revenue this period compared to the same period last year of -2.72% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ARLP-US is holding onto its market share. Also, for comparison purposes, revenues changed by -4.47% and earnings by 47.90% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 20.44% to 27.27% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 34.42% to 39.09% compared to the same period last year. For comparison, gross margins were 20.75% and EBITDA margins were 32.07% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 17.64% to 23.57% and (2) one-time items. The company’s pretax margins are now 22.70% compared to 3.96% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Alliance Resource Partners LP produces and markets coal to United States utilities and industrial users. It operates through the following segments: Illinois Basin, Appalachia, and Other and Corporate. The Illinois Basin segment is comprised of Webster County coal’s Dotiki mining complex, Gibson mining complex, which includes the Gibson north mine and the Gibson south project, Hopkins County coal’s Elk Creek mining complex, White County coal’s Pattiki mining complex, Warrior’s mining complex, River View’s mining complex, the Sebree property and certain properties of Alliance Resource Properties and ARP Sebree LLC. The Appalachian segment is composed of Pontiki and MC Mining complexes. The Other and Corporate segment includes marketing and administrative expenses, Mt. Vernon dock activities, coal brokerage activity, its equity investment in Mid-America Carbonates LLC and certain activities of Alliance Resource Properties. The company was founded in May 1999 and is headquartered in Tulsa, OK.

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