Alliance Resource Partners, L.P. (NASDAQ: ARLP) has reported a resilient performance in the second quarter of 2025, despite facing challenges from lower coal pricing and a decrease in net income. The company's total revenues for the quarter saw a 7.7% year-over-year decline to $547.5 million, primarily due to an 11.3% drop in average coal sales prices and reduced transportation revenues. Net income also fell to $59.4 million from $100.2 million in the same quarter the previous year, attributed to lower revenues, increased depreciation, and a $25.0 million non-cash impairment on a battery materials equity investment. However, these were partially offset by a $16.6 million increase in the fair value of digital assets.
Adjusted EBITDA for the quarter was $161.9 million, marking a 1.2% sequential increase. Despite macroeconomic uncertainties, ARLP has updated its FY25 guidance, supported by expectations for improved production at Tunnel Ridge, higher sales volumes from the Illinois Basin, cost efficiencies, and strong contracted commitments. The company's coal operations reported sales volumes of 8.38 million tons, up 6.8% year-over-year, though pricing decreased by 11.3% to $57.92 per ton. The Illinois Basin saw a 15.2% increase in sales volumes, while Appalachia volumes fell by 16.8% due to ongoing issues at Tunnel Ridge.
ARLP's royalty business contributed $53.1 million in total revenues for the quarter, with oil and gas royalties totaling $35.5 million. The company ended the quarter with solid liquidity, holding $499.2 million in total liquidity, including $55.0 million in cash and $444.2 million available under its credit facilities. Free cash flow for the quarter was $79.0 million, and the company continues to return a quarterly cash distribution of $0.60 per unit.
Stonegate Capital Partners, in its updated coverage, uses an EV/EBITDA framework to value ARLP, arriving at a valuation range of $29.51 to $32.25 with a midpoint of $30.88. This analysis reflects confidence in ARLP's ability to navigate current market challenges and capitalize on future opportunities. For more details on Stonegate Capital Partners' analysis, visit https://www.stonegateinc.com.
