Foundation Coal Holdings, Inc. (FCL), a coal supplier to various industries, reported Monday a profit in the second quarter, despite fall in revenues, mainly reflecting an increase in average per ton realizations and lower cost of coal sales.
For the second quarter, net profit was $30.7 million or $0.67 per share, compared with a net loss of $4.4 million or $0.10 per share in the previous year. The results of the latest quarter included one-time costs of $4.8 million related to Foundation Coal's merger with Alpha Natural Resources, Inc.
On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $0.71 per share in the second quarter. Analysts' estimates typically exclude special items.
James Roberts, chief executive of Foundation Coal attributed the quarterly improvement in the bottomline to higher average realizations in all active production regions, consistent production at almost all units, and a significant drop in the cost of coal sales.
Roberts added, "Results would have been stronger still if customer deliveries had not been reduced due to the current economic downturn, reduced demand for metallurgical coal during the quarter and excessively high inventory levels at many domestic coal-fired electricity plants."
Revenues for the quarter dipped to $404.7 million from $411.9 million. Eight analysts were expecting revenue of $445.17 million in the second quarter.
Coal Sales Revenues declined 1% to $399 million from $404.8 million, mainly due to lower Central Appalachian shipments partially offset by higher shipment volumes from the Powder River Basin, or PRB, and higher average realizations per ton, especially in Northern and Central Appalachia.
Tons of coal sold came down to $16.4 million from $17.0 million, though shipment from the PRB grew by 400 thousand tons to 12.0 million tons. Northern Appalachian shipments were almost flat at 3.3 million tons compared to 3.4 million tons in the comparable quarter last year.
Foundation Coal noted that average per ton sales realizations for the period went up in all active production regions. Average realizations per ton in Central Appalachia 19% and in Northern Appalachia rose 18% from the past year, while average realizations per ton in the PRB grew 7%.
Cost of coal sales declined 15% by $50.8 million to $279.5 million from $330.2 million in the second quarter of 2008, chiefly because of inventory variances and lower purchased coal expense on account of the company's ability to fulfill most contracts with company-produced coal.
For the first half of fiscal 2009, net income surged to $26.2 million or $0.58 per share from $1.7 million or $0.04 per share in the past year. Revenues for the period dipped to $809.8 million from $824.2 million in the same period last year.
Looking ahead to fiscal 2009, the company expects capital expenditures to range from $190 million - $210 million.
FCL is currently trading at at $34.64, down $1.60 or 4.42%, on the NYSE.
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