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Peabody Warns Of Weak Q1 Earnings - Update

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12/14/2012 11:42 AM ET

Coal miner Peabody Energy Corp. (BTU: Quote), said Friday its earnings for the first quarter of 2013 will be impacted by higher costs, weaker prices and sales. The company also said it will reduce its capital expenditure for the full year by fifty percent.

Peabody had earlier warned that global coal markets could be hurt by economic weakness owing to the sluggishness in the U.S, European recession and decelerating China growth.

The world's largest private-sector coal miner said earnings for the first quarter will be impacted by a rise in Australian unit costs of about 10 percent, and expressed concern over lower realized metallurgical coal prices.

The company further anticipates about 2 million tons in U.S. sales, as well as a drop of about 5 percent in average realized pricing due to the expiration of higher-priced contracts. The coal miner also warned of higher depreciation, amortization, and production expenses.

Peabody said it expects the first quarter to mark trough earnings, with results expected to increase as the year proceeds based on improving Australian production and margins.

"While the first quarter is challenged due to a combination of factors, we expect quarter-over-quarter improvement throughout the remainder of the year. We also expect to begin realizing the benefits of owner-operator conversion in the second quarter," said CEO Gregory Boyce.

For the full year of 2013, Peabody expects capex to be 50 percent lower than the $1 billion to $1.1 billion allocated for 2012.

The company expects U.S. sales volumes of 180 to 190 million tons in 2013, down from 2012 targets of 188 to 192 million tons. Australian sales volumes are expected in the range of 33 million tons to 36 million tons. Full-year Australian costs are expected to rise about 5 percent, but expects overall margins to improve from the first-quarter level.

Peabody is trading at $28.42, up 2.90%, on a volume of 3 million shares on the NYSE.

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by RTT Staff Writer

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