Coal producer Arch Coal Inc. (ACI) on Friday posted a steep decline in third-quarter profit, hampered by weak demand amid enonomic slowdown. Further, the company revised its earnings forecast for the full year, and said it sees improvement in met markets and in the underlying global and domestic economies.
The St. Louis, Missouri-based company's third-quarter net income was $25.2 million or $0.16 per share, compared to $97.8 million or $0.68 per share in the year-ago quarter.
On average, 23 analysts polled by Thomson Reuters expected the company to post earnings of $0.04 per share. Analysts' estimates typically exclude special items.
Quarterly revenues declined to $615.0 million from $769.5 million reported in the same period a year ago, and fell shy of sixteen Wall Street analysts' consensus revenue estimate of $605.08 million for the quarter.
Steven Leer, chairman and chief executive officer of Arch Coal, said, "We achieved margin expansion in each operating segment, driven by increased metallurgical coal demand in Central Appalachia and continued successful cost control across all regions. Our trading and brokerage operations also added incremental earnings in the quarter just ended."
Consolidated tons sold and average sales price per ton declined to 29.1 million tons from 34.8 million tons in the previous year. Western Bituminous region's third quarter volumes fell to 4.6 million tons from 5.1 million tons in the third quarter of 2008. In Central Appalachia, volumes declined to 3.0 million tons from 3.5 million tons last year. Consolidated average sales price per ton also decreased to $20.05 from $20.38 last year.
The company's consolidated cash cost per ton in the quarter increased to $15.75 from $14.59 a year earlier. Cash margin per ton, on a consolidated basis, decreased to $4.30 from the previous year's $5.79.
For the nine-month period, the company reported net income of $40.6 million or $0.28 per share, compared to $292.0 million or $2.02 per share in the prior-year period.
Revenues for the nine months ended September 30, 2009 dropped to $1.85 billion from $2.25 billion in the previous year.
Looking ahead, the company projects fiscal 2009 earnings to range between $0.28 and $0.43 per share, versus its prior outlook range of $0.25 - $0.55 per share. The full year guidance includes an expected $15 million of acquisition-related expenses for Jacobs Ranch, and an estimated $16 million of non-cash intangible asset charges related to above-market sales contract amortization stemming from the Jacobs Ranch acquisition that is expected to be recorded in the fourth quarter. Analysts are looking for earnings of $0.31 per share for the full year.
Capital spending is now estimated to be in the range of $160 million - $170 million, excluding reserve additions, and depreciation, depletion and amortization expense is currently expected to range between $314 million and $322 million.
Including volume from Jacobs Ranch for the fourth quarter of 2009, Arch now projects total sales volumes from company-controlled operations of between 121 million and 125 million tons for full year 2009, excluding purchased coal from third parties. The company also estimates total domestic coal supply to fall by roughly 100 million tons in 2009, with declines in nearly all coal-producing basins.
Eaves added, "Our priorities for 2010 will be to more than double our sales of met and PCI coal, compete in the seaborne steam markets on an opportunistic basis, patiently market our uncommitted sales position and remain focused on profitably managing our business through a potentially muted 2010 domestic steam coal market."
Moreover, Arch coal estimates U.S. power demand to decline 4% in 2009, due to one of the mildest summers on record in major coal consuming regions as well as significant declines in industrial demand stemming from the global recession. Hence, the company believes coal consumption could grow again in 2010 even if power demand increases only modestly.
Among Arch Coal's rivals, Consol Energy, Inc. (CNX) reported a decline in third-quarter profit that totaled $87.4 million or $0.48 per share, compared to $90.1 million or $0.49 per share in the year-ago quarter, as revenue decreased on lower thermal coal production, met coal production and gas prices. Quarterly revenue dropped 7% to $1.09 billion from $1.17 billion in the prior-year period.
Another peer, Peabody Energy Corp. (BTU) posted third-quarter net income of $106.8 million or $0.40 per share, down from $369.5 million or $1.35 per share a year earlier, hurt by lower demand mainly in the U.S. Revenues declined 11.5% to $1.67 billion from $1.89 billion in the same quarter last year. For fiscal 2009, Peabody Energy expects earnings from continuing operations of $1.34 - $1.54 per share, and adjusted earnings from continuing operations in a range of $1.60 - $1.80 per share.
Yet another competitor, Massey Energy Co. (MEE) reported lower third-quarter profit, totaling $16.5 million or $0.19 per share, compared to $51.6 million or $0.61 per share for the year-ago quarter, hurt by a decline in average realized prices on coal shipped and an increase in average cash cost. Total revenue for the quarter fell 16% to $641.6 million from $763.3 million in the same quarter of last year.
Arch Coal shares, which have been trading between $10.43 and $25.86 in the past 52 weeks, are currently trading at $23.70, up 60 cents or 2.60%.
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