Coal miner units Alliance resource partners (NASDAQ: ARLP) were 10.5% lower today. That said, by about 3:30 p.m. EDT, the Master Limited Partnership (MLP) had reduced the loss to just about 7%. The main driver here was profits, but not all the news was bad – just worse than good.
Revenues in the first quarter of 2021 were down about 9% year-over-year, driven by an almost 6% drop in volume and a 3% drop in prices. On the smaller, but growing, royalty side of the business, revenues fell about 1%, with a notable drop in its oil and gas results. In other words, there wasn’t much to work on for Alliance Resource Partners in the first quarter. However, one-time charges during the period of the previous year allowed the partnership to go from a unit loss of $ 1.14 in the first quarter of 2020 to a profit of $ 0.19 per unit. in the first quarter of 2021.
So while the performance of the partnership was not really excellent during the quarter, the results showed a significant improvement. In addition, the markets in which it operates have started to stabilize and even improve. This suggests that things could improve as the year progresses. Meanwhile, part of the shortfall in coal sales was due to delayed shipments that are expected to be made up later in the year. So there were some very clear positives that accompanied the negatives.
Perhaps the most important information, however, was that Alliance Resource Partners has reinstated its quarterly distribution. But even here, the picture was mixed given that the payout is only a quarter of what it was before it was suspended in early 2020. The quarterly payout of $ 0.10 per share is only 30% of the free cash flow that management expects to generate. is likely to hold even if there are other headwinds. Still, investors are likely to be hoping for more, given that Master LPs are specifically designed to pass income through to unitholders.
So when you step back, it’s understandable that investors were pessimistic today, and frankly all but the most aggressive long-term investors would probably be better off looking for investments outside of the coal business for now. . While the coal won’t disappear overnight, it is a high-risk space at the moment, and its long-term outlook is cloudy at best.
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