Good day, ladies and gentlemen, and welcome to the Peabody Energy Q1 2021 Earnings Conference. At this time, all participants are in a listen only mode. Following today's presentation, instructions will be given for the question and answer session. As a reminder, this conference is being recorded today. I would now like to turn the conference over to Ms.
Alice Cerinos. Please go ahead, ma'am.
Good morning, and thanks for joining Peabody's earnings call for the Q1 of 2021. With me today are President and CEO, Glenn Kellow And CFO, Mark Sperbeck. Within the earnings release, you'll find our statement on forward looking information as well as a reconciliation of non GAAP financial measures. We encourage you to consider the risk factors referenced there along with our public filings with the SEC. I'll now turn the call over to Glenn.
Thanks, Alice, and good morning, everyone. Before we get started this morning, I'd like to take a moment and welcome Alice To her new role as Head of IR and Communications for Peabody, Alice has over 20 years of financial and commercial experience with our company in the U. S. And overseas. Turning now to the quarter, we continue to see operational and productivity improvements Thanks, hold across the company.
We are off to a good start on safety, particularly in the United States, where the injury rate for the quarter was Well, thank you, Theon. And yes, apologies, somehow we were disconnected there. But look, it's Sling Keller again. And look, I'm just going to resume the comments. And We were talking about the fact that our safety performance had improved probably 50% over the last year.
We have lowered cost per ton in 3 of our 4 operating segments compared to the prior year and further reduced SG and A spending. While seaborne thermal volumes and costs were temporarily impacted by flooding and a ship loader outage, We anticipate performance progressively improving throughout the year. U. S. Thermal mines also performed well, Lowering cost per ton 9% from the prior year and outstanding performance given volumes were down 13%.
Seaborne met cost per ton improved modestly over the prior year, even as volumes were muted by idle mines and the ongoing pandemic. Productivity improvements at Coppabella and Moorvale contributed to the complex overcoming an $0.11 unfavorable increase in foreign currency rates. We continue to take action to improve our met coal operating performance. And while we recognize there certainly is more work to do, We aren't taking our foot off the pedal. At Shoal Creek, while the mine remains idled, we are continuing activities to increase productivity, Lower costs and improved yields in the future, resuming production and shipments are contingent upon completion of these initiatives as well as stable customer demand.
On these fronts, our labor contract expired April 1st And we've been in active negotiations with the union. We have made the decision also to upgrade the frick plant to capture a yield improvement And we continue discussions with customers about a mine restart. As a reminder, That mine has historically had large and long term customer relationships with the majority of volumes pricing of the hard coking coal market. We'd anticipate the prep plant project to be completed in mid quarter 3. At Metropolitan, while discussions are ongoing with customers and the workforce, the full workforce will return to the mine in early May.
Development work has been partly ongoing through the idle period and longwall production is anticipated to begin in the 2nd quarter With the ramping up to full production planned in the Q3 of this year. You'll recall that we've been continuing a commercial process for North Goonyella. We've been impacted by a variety of factors. And while the process is ongoing, at this stage, it has not presented us with any attractive executable options. We continue to be active across a range of fronts, regulatory, mine planning and commercial, and believe North Goonyella is a valuable asset with world class infrastructure.
You may also have seen that we recently entered into an agreement to sell our closed Millennium line and assign a portion of the related asset retirement obligations to owners of a neighboring deposit. While this is still subject to closing conditions, it is an example of our continual evaluation of options. From a broader market perspective, seaborne thermal coal conditions remain favorable, while Chinese import restrictions Our significant disruptive factor to seaborne metallurgical coal prices and continue to weigh on Australian hard coking coal, while low vol PCI Has narrowed to near parity. Tight supply and low inventory levels have kept Newcastle thermal pricing At improved levels year to date, China's domestic thermal supply remains hampered by heightened safety inspections. India's plant stocks have been falling gradually since mid December as government owned plants reduce intake and there has been a delay in typical restocking Ahead of the monsoon season in June.
As at the end of March, India's plant inventory levels were estimated at approximately 15 days burn This is some 28 days a year ago. Our low cost thermal coal platform is well positioned seaborne to take advantage of these higher near term prices. Within the seaborne met coal market, The imbalance between Australian export and Chinese delivered prices remains wide. The delivered price into China is currently trading at roughly double those seen FOB Australia as the unofficial ban on Australian coals remains in place. In addition, increased COVID concerns with the crisis in India are further weighing on Australian hard coking coal pricing.
These factors continue to pressure the seaborne met market despite global steel production increasing 5% year over year. In contrast, the spread between Australian hard coking coal pricing and low vol PCI pricing As recently narrowed to near parity, tight low vol PCI supply coupled with China paying a premium for Russian coals have contributed to rising low vol PCI prices. Here in the U. S, Overall electricity demand increased 2% over last year, positively impacted by cold weather. Higher natural gas prices resulted in U.
S. Thermal coal share of electricity generation increasing by 37% 24%, while natural gas declined to 34%. As a result, Coal inventories have fallen by 20,000,000 tons since December. During the quarter, utility consumption of PRB coal rose approximately 35% compared to the prior year. I'll now turn things over to Mark to cover the financials.
Thanks, Glenn, and good morning, everyone. 1st quarter results demonstrated our continued focus on cost management and performance improvement As cash flows from operations increased to $71,000,000 compared to a net use in the prior year, this result was achieved Despite lower volumes and average realized pricing, compared to last year's Q1, total volumes declined 15% With met shipments down 50%, primarily due to the Shoal Creek and Metropolitan mines remaining suspended during the quarter. Lower pricing also weighed on results as average realized prices declined over $8 per ton for our seaborne met products and $0.35 per ton for PRB thermal coals. Cost savings initiatives continue to garner results at the corporate office as well, With SG and A down 13% year over year, allowing us to revise our full year estimated SG and A cost down another 5,000,000 At this run rate, Peabody's annual SG and A expense would be at its lowest level since 1999. Interest expense of $52,000,000 includes $11,000,000 of one time fees that were expensed Upon completion of the refinancing transactions early in the quarter, higher borrowing costs and amortization of related debt issuance costs Also contributed to an increase in interest expense year over year.
Loss from continuing operations, net of income taxes totaled 78,000,000 Adjusted EBITDA of $61,000,000 was 66 percent or $24,000,000 higher than the Q1 of last year. Turning now to segment results. As expected, seaborne thermal costs and volumes were unfavorably impacted by the transition to the United Wambo joint venture. In addition, the stronger Australian dollar, historic flooding in New South Wales and related impacts on the logistics chain and an unexpected shiploader outage at the Newcastle NCIG port raised costs in the quarter. While we were fortunate not to suspend any of these operations, 1st quarter shipments were about 400,000 tons lower than expected due to the logistics challenges.
Continued strong performance at Wilpiniong partly offset these higher costs. During the quarter, Wilpinjong sold 2,900,000 tons including 1,100,000 export tons at an average cost of $23 Wilpin Young recorded $25,000,000 of adjusted EBITDA and had $104,000,000 of cash at March 31. 1st quarter met volumes were impacted by Shoal Creek and Metropolitan remaining idled. However, we are seeing strong demand return for our PCI products. We continue to take action to lower costs to a more competitive level and indeed variable costs came down year over year.
Cost per ton were in line with the prior year despite shipments being down 1,000,000 tons. Excluding idled mine costs, Net costs were $84 per ton, about $3.5 lower than our average realized price for the quarter. Productivity improvements at Coppabella and Moorvale contributed to the cost declining $13 per tonne Even with the unfavorable exchange rate impact, in the U. S, PRB costs decreased 7% year over year Due to ongoing cost reduction initiatives and favorable pit sequencing, cost per ton reductions were achieved even with shipments down 12%, of which an estimated 1,000,000 tons was timing related from disruptions due to severe weather in February. Cost per tonne also declined in the other U.
S. Thermal segment as we continue to benefit from ongoing cost management initiatives and productivity improvements. From a balance sheet perspective, we used some cash and completed the refinancing transactions, repaid approximately $54,000,000 of debt, We made scheduled interest payments and reinvested in our asset portfolio with capital and net contributions to joint ventures. In addition, lower receivables largely related to timing of seaborne shipments resulted in outstanding letters of credit temporarily exceeding the balance of Eligible receivables under our accounts receivable securitization facility. This required us to post $44,000,000 of cash collateral recorded as restricted cash to back these LCs.
As eligible receivables increase, this cash collateral would be returned to us. At March 31, we had nearly $624,000,000 of cash, cash equivalents and restricted cash. Looking ahead to the remainder of the year, we are planning for PRB volumes to remain fully in line with 2020. Currently, we have about 95% of those volumes priced. Other U.
S. Thermal shipments are expected to total 16,000,000 tons. Costs for both segments are expected to be largely in line with the prior year. Seaborne thermal volumes and costs are expected to progressively improve From Q1 levels, we expect this segment to ship 17,000,000 tons, including 9,000,000 tons to 10,000,000 tons of export coal. Compared to 2020, seaborne thermal costs are expected to increase given the lower volumes, higher expected royalties and current unfavorable exchange rates.
Seaborne met volumes are contingent upon the ongoing improvement programs and activities at Shoal Creek as well as customer demand. Metropolitan is expected to ramp up to a normal run rate in the Q3. At Coppabella and Mooreville, volumes are expected to increase due to stronger customer demand and productivity improvements. As mentioned earlier, we are targeting lower SG and A than previously thought And maintaining our prior capital expenditure guidance of $225,000,000 which includes $135,000,000 for significant reinvestment in our Australian based seaborne platforms. Looking ahead to next year, we are targeting lower capital expenditures due to a substantial reduction in major project spending.
I'd now like to turn the call over for questions. Operator?
Thank you. Please make sure your mute function is turned off. To signal for questions. Okay, so we will now take our first question from David at BMO Capital Markets. Please go ahead.
All right. Thank you and thanks for taking my questions. I just have a few I have a couple of short term ish and then one strategic question. On the short term ish type of questions, first of all, The 2nd quarter outlook for flat or similar results, I was wondering if you could talk through the puts and takes there. It looks like obviously, seawater thermal prices Hi, there were some cost issues in the Q1 that seemed like they were one time ish in the seaborne thermal business.
So I would have expected A bit of a sequential improvement in the Q2. So I'm curious if you could just talk through what the offsets are. That's my first question. And then Just real quickly, if you could just touch on what the volume expectations are from the Metropolitan Mine once it restarted in the Q3? And then my last just Sorry, I'm going off on, but my last strategic question is if you could just give us an update on the CEO search.
Thank you.
Hi, David, it's Mark. On seaborne thermal, you're right, we're seeing improved pricing in the thermal markets, Newcastle thermal. We are continuing to transition to the Wambo OpenCut joint venture. So volumes are improving, but still lower than run rates. I'm not expecting significant overall improvement in the next quarter.
Mike, I'll take the next one. In terms of metropolitan, Look, we've been continuing some development during this idle period. We're bringing back the workforce next week, the remainder of the workforce next week. We'd expect to ramp up Through the press of the second quarter into the Q3, that mine by reference produced about 1,300,000 tons last year. And it is going to vary depending on longwall outages And longwall move timings, as well as ongoing customer demand.
Your third question on the CEO search, the Board have indicated that and the company has indicated that it's Undertaking both an external search and an internal search, and that process is still ongoing.
Okay. Just real quick thank you for that by the way. And just a real quick follow-up on the Back to the first question, I understand the commentary on the thermal, but just overall, the commentary was basically a kind of Similar, I believe, 2nd quarter result versus the Q1. So where are the offsets to the positives that we're seeing in thermal, Seaborne thermal and the cost situation probably in seaborne thermal on a quarter over quarter basis.
David, let me reiterate. I think Wilpinjong continues It performed according to the guidance that's out there and fairly consistent. I think at the Wambo Open Cut joint venture, we have that The impact, the underground is possibly had some inventory reductions in the quarter. In In the Q1, we won't probably see that in the Q2. Does that answer your question?
So let me just ask it more directly. Are unit costs going up, flat or down in seaborne thermal Quarter over quarter in the second quarter and similar question for the Met business as well.
Thermal volumes, gone down. Okay. The unit costs are improving sequentially over the Q1. Okay. And then on the met side?
On the met costs?
And volume.
Yes. Again, the met volumes are really going to be contingent upon the ramp up Of Metropolitan, the CMJV is having lower production in the second quarter.
Okay. Thank you.
Thank you. We will now take our next question from Lucas at B. Riley Securities. Please go ahead.
Hey, good morning, everyone. Question on Soul Creek, you mentioned in the release a couple of activities to Improved productivity there. And I wondered, could you elaborate at what specifically would be happening underground Maybe at the surface even, would appreciate that. And then also in terms of the negotiations on the labor side, anything you could share there, Would appreciate that. Thank you.
Thanks, Lucas. And the thing I called out in terms of activity, we made the decision To make some enhancements to the prep plant to upgrade yields, and that outage will take us through into the Q3, Now the middle of the Q3. With respect to the Labor discussions says negotiations, as you would expect, are probably limited given their active discussions underway, limited in what I can say, Other than we are in discussions around ways in which we as a company believes that we can improve our competitiveness and productivity through that process.
I appreciate that. And then a follow-up on the prep Plant modification. So is it fair to conclude that Soul Creek wouldn't be restarted before all those upgrades are completed?
Certainly, that would be the limiting factor on shipments with that would be true. It could be possible To run underground production before that time.
That's helpful. Thank you. And then Bigger picture question. Over the years, there have been discussions around The logic behind the potential separation of seaborne or more domestic U. S.
Assets, is that something that is Potentially contemplated that could make sense or what do you see kind of Peabody evolving Over the foreseeable future, would appreciate any thoughts you can share. Thank you.
Lucas, as is indicated, there is a transition of the CEO underway And that's probably best for the incoming CEO in terms of being able to respond Clearly, the company, when you look across the portfolio, has an extremely strong U. S. Thermal business. We have what we regard as the lowest cost and best positioned assets in the best basin in the PRB. Our Midwest business did exceptionally well in the quarter and had very strong returns.
And similarly, our seaborne thermal business is a strong business that's produced attractive margins. We've got more work to do on our met on the met front. We've seen the steps we've taken to improve that activity. And but there is more work To do at the same time, then we believe in the long term outlook for metallurgical coal.
I appreciate that. Well, thank you and best of luck.
Thanks, Louis.
Thank you. So that is all the questions we have in the queue at this time. So I would like to turn the conference back over to Glenn Kellow.
Thank you, operator. And look, apologies again for the Technical disruption that was at the start of the call. Thank you for joining us today. I'd especially like to thank our employees We're continuing to keep safety at the forefront of all we do and for continuing to execute on our various cost improvement initiatives. I'd also like to thank our customers, investors and insurance providers for your continued support.
Operator, that concludes our call today.
Thank you. So this does conclude today's call and you may now disconnect.