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Natural Resource Partners Q1 Earnings Dip Y/Y on Weak Commodity Prices

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Shares of Natural Resource Partners L.P. (NRP - Free Report) have declined 6.1% since reporting results for the first quarter of 2025. This compares unfavorably with the S&P 500 index’s 4.2% growth in the same period. Over the past month, NRP shares have dropped 9.2%, underperforming the S&P 500’s 11.5% rally.

Revenue & Earnings Slide on Commodity Weakness

NRP reported first-quarter 2025 net income of $40.3 million and a free cash flow of $35.1 million, both representing steep year-over-year declines. Net income fell 28.4% from $56.2 million a year earlier, whereas the free cash flow plunged more than 51% from $72.1 million.

The company’s revenues dropped 20.9% to $60.5 million from $76.4 million in the prior-year period, primarily led by lower coal and soda ash pricing. Earnings per common unit came in at $3.01 (basic), down from $4.13 in the year-ago quarter.

Natural Resource Partners LP Price, Consensus and EPS Surprise

 

Natural Resource Partners LP Price, Consensus and EPS Surprise

Natural Resource Partners LP price-consensus-eps-surprise-chart | Natural Resource Partners LP Quote

Segment Performance & Key Metrics

Mineral Rights Under Pressure

NRP’s Mineral Rights segment generated $45.2 million in net income in the quarter, reflecting a $15.4-million (25.4%) drop from $60.6 million a year earlier. Segment free cash flow fell $26.5 million from $70.4 million to $43.9 million. The combined average coal royalty revenue per ton was $4.36, representing a 28.8% decrease from $6.12 per ton in the prior-year period. Coal royalty revenues declined 24.3% year over year to $35.5 million, with a sharp drop in Central Appalachia volumes and pricing contributing to the decline.

Soda Ash Struggles Continue

The Soda Ash segment also faced headwinds. NRP’s 49% equity interest in Sisecam Wyoming generated $4.6 million in equity earnings, down 15.4% from $5.5 million a year earlier. Distributions received were $3 million, representing an 80% year-over-year decrease. This led to an $11.3-million decline in the segment free cash flow to $2.9 million from $14.1 million. Management attributed the weakness to an unfavorable shift in the international sales mix and a global oversupply environment.

Management Commentary

Executives acknowledged the sustained pressure on key commodity prices, citing weak demand for steel and elevated coal inventories as persistent headwinds. CFO Chris Zolas emphasized that the operating cash flow and the free cash flow were affected by lower metallurgical coal pricing and volumes. Despite these setbacks, management remained optimistic about NRP’s underlying financial health. President and COO Craig Nunez noted that the company’s capital structure remains solid and projected higher distributions once debt is fully repaid in 2026.

Headline Drivers

Commodities & Cost Dynamics

The company’s performance was hampered by a sharp decline in metallurgical coal prices and continued challenges in the global soda ash market. Metallurgical and thermal coal pricing is now near production cost for many operators.

However, as a royalty owner, NRP does not bear the production costs and can still collect revenues at these lower thresholds. In soda ash, increased supply, primarily from China, combined with weak glass and auto demand, has depressed prices to levels below production costs for many global producers.

Guidance & Capital Allocation

NRP reaffirmed its long-term strategy to eliminate debt and unlock greater cash flow flexibility. Management reiterated its prioritization of balance sheet strength, followed by distributions and then opportunistic unit repurchases. As of March 31, 2025, total debt stood at $139 million, down nearly 90% from the 2015 level. The leverage ratio was a conservative 0.7X. Available liquidity was $120.5 million.

Other Developments

While it continues to explore carbon-neutral initiatives (CNI), including carbon sequestration, geothermal energy and lithium production, management acknowledged that near-term cash flows from these ventures remain speculative. Since 2019, CNI has generated $42 million in revenues, but current leasing interest, particularly for underground carbon storage, remains subdued amid regulatory uncertainty.

In sum, while Natural Resource Partners has taken significant steps to solidify its balance sheet and streamline operations, commodity price headwinds have materially impacted near-term financial results. Investors appear to be adopting a cautious stance until visibility improves on coal and soda ash pricing dynamics.


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