NACCO Q2 2026 Earnings: Solar Impairment Overshadows Improved Operations

NACCO Industries (NYSE: NC) reported Q2 2026 revenue of $72.3 million, up 6% year over year, while diluted EPS fell to a loss of $0.13 from earnings of $0.44. For the quarter ended June 30, gross profit more than doubled and adjusted EBITDA rose 72%, but a $12.0 million solar-project impairment pushed the company to a GAAP net loss. Management expects operating performance to moderate during the second half of 2026.

Core Financial Results

Revenue growth was modest, but cost of sales declined to $57.1 million from $61.4 million, helping gross profit rise 123% and lifting gross margin by approximately 11 percentage points. The improvement reflected stronger operating performance across all three reportable segments.

That progress did not reach the GAAP bottom line because the company recorded $12.0 million of impairment charges for solar development projects within ReGen Resources. Adjusted EBITDA, which excludes the impairment, remained substantially above the prior-year level but declined 3% sequentially.

Adjusted EBITDA is a non-GAAP measure that excludes impairment charges, taxes, net interest expense, and depreciation, depletion and amortization.

Business and Segment Performance

All three reportable segments increased operating profit despite divergent revenue trends. Utility Coal Mining improved profitability while revenue declined, whereas Contract Mining and Minerals and Royalties generated both revenue and profit growth.

Utility Coal Mining

Revenue fell 25% from $28.6 million because operational issues at a customer’s Mississippi power plant reduced consolidated coal deliveries. Favorable contractual pricing partly offset the volume pressure.

Total deliveries nevertheless increased to 5.55 million tons from 4.63 million tons because deliveries from unconsolidated operations rose. Operating profit increased from $1.22 million to $6.28 million, supported by reclamation work during the power plant outages, higher unconsolidated mine earnings, lower operating expenses, and the absence of a $1.3 million inventory impairment recorded a year earlier.

Contract Mining

Total revenue increased 20%, while revenue excluding reimbursable costs rose 34% to $16.44 million. Operating profit increased from $1.01 million to $3.77 million.

The principal drivers were the commencement and ramp-up of a new dragline services contract and increased customer requirements at limestone mining operations. Tons delivered rose to 16.0 million from 13.9 million.

Minerals and Royalties

Revenue increased 46% to $10.62 million, while operating profit rose to $6.75 million from $5.21 million. A 46% increase in royalty revenue was driven by higher oil prices and a favorable adjustment to prior-period pricing estimates. Lower earnings from an equity investment partly offset those benefits.

Solar Impairment Masks Better Underlying Operations

The main disconnect in the quarter was between improved gross profit and adjusted EBITDA on one hand and the reported operating and net losses on the other. The $11.98 million solar impairment was recorded in unallocated operations, causing the unallocated operating loss to widen to approximately $19.1 million from $7.5 million.

Because adjusted EBITDA excludes the impairment, it better reflects the year-over-year improvement in the reportable segments. However, the 3% sequential decline in adjusted EBITDA indicates that underlying momentum moderated from Q1. NACCO attributed that decline mainly to lower-than-anticipated equity investment earnings, operational issues at the Mississippi power plant, and reduced earnings from unconsolidated mines.

The prior-year net income comparison also benefited from a $3.6 million gain on the settlement of an excess funding liability that did not recur in Q2 2026.

Liquidity and Capital Allocation

NACCO ended the quarter with $45.5 million in cash and $69.1 million available under its revolving credit facility, producing total liquidity of $114.6 million. Outstanding debt was $120.1 million.

Management said free cash flow will be prioritized toward improving liquidity and reducing debt while the company continues to evaluate growth investments under its capital-return criteria. This balance will be important because NACCO expects to invest up to $35 million during the remainder of 2026, primarily in business development opportunities.

Guidance

Management expects full-year adjusted EBITDA to improve from 2025, but growth is projected to moderate during the second half. In contrast, GAAP operating profit and net income are expected to decline because of realized and potential solar-related charges and anticipated inventory write-downs in Utility Coal Mining.

Contract Mining is expected to remain the primary expansion driver, including the new Florida dragline contract and the planned start of an Arizona limestone quarry in Q4 2026. Management expects second-half Contract Mining results to remain above the prior year but below the strong first-half level as customer demand moderates.

Recent Insider Transactions

The supplied insider data reports 115,881 shares purchased across 31 transactions and 7,500 shares sold across three transactions during the latest six-month period, resulting in net purchases of 108,381 shares. However, the ten most recent listed records were stock awards reported at zero transaction value rather than open-market purchases; share quantities were not supplied for those awards.

The awards do not provide evidence of insiders making cash purchases and should not be used alone to infer their view of NACCO’s outlook.

Risks Investors Should Monitor

• Additional solar costs: NACCO is considering asset sales, contract amendments and other actions involving certain solar projects. These efforts could result in further curtailment costs after the Q2 impairment.
• Mississippi operating conditions: Customer power plant availability, lower demand, higher diesel costs and an anticipated inventory impairment could pressure Utility Coal Mining during the second half.
• Minerals and Royalties moderation: Production declines, commodity prices, equity investment results and the pace of domestic development activity could reduce segment earnings from first-half levels.
• Growth-project execution: Contract Mining’s outlook depends partly on the new dragline contract, the Arizona quarry start-up and customer demand, which is expected to soften later in 2026.
• Cash requirements and leverage: Planned investments of up to $35 million and an expected use of cash before financing could limit near-term debt reduction despite $114.6 million of liquidity.

Summary

NACCO’s Q2 2026 report showed clear improvement in gross profitability and adjusted EBITDA across its core segments, particularly Utility Coal Mining and Contract Mining. The solar impairment obscured that progress and created a GAAP loss, while sequential moderation signaled that first-half momentum may not continue at the same pace. Investors’ next focus will be additional solar costs, Mississippi power plant conditions, the ramp-up of new Contract Mining projects, and whether the company can fund growth while strengthening liquidity and reducing debt.