Coal producer Arch Coal, Inc. (ACI) reported Friday a sharp drop in fourth-quarter profit, hurt by lower sales volumes and a decline in average sales price due to weak economic and coal market conditions. The company noted that inclement weather and electric outages impacted most of its operations during December. Based on anticipated customer shipments, Arch Coal expects fiscal 2010 first quarter to be its weakest operating period of the year, sending the shares down by over 7% in morning trade.
For the fourth quarter, net income attributable to the company plunged to $1.53 million or $0.01 per share from $62.34 million or $0.44 per share in the previous year. Latest quarter results include the impact of Jacobs Ranch acquisition-related charges and amortization of acquired coal supply agreements. Excluding charges, adjusted net income was $18.22 million, or $0.11 per share for the quarter. Adjustments include amortization of acquired sales contracts net of $19.72 million, costs related to the acquisition of Jacobs Ranch totaling $6.56 million and tax impact of adjustments of $9.59 million.
On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.17 per share for the quarter. Analysts' estimates typically exclude special items.
The company noted that net income and earnings per share for the fourth quarter of 2008 benefited from a $19.6 million excise tax refund. For the third quarter, the company had posted a net income of $25.2 million or $0.16 per share, compared to $97.8 million or $0.68 per share in the year-ago quarter.
The St. Louis, Missouri-based company's fourth-quarter revenues from coal sales declined to $725.47 million from $729.88 million in the same quarter a year ago. Twelve analysts estimated revenues of $728.37 million for the quarter. In its third quarter, revenues declined to $615.0 million from $769.5 million reported in the same period a year ago. Income from operations for the fourth quarter dropped to $29.49 million from $87.39 million last year.
Consolidated sales volumes for the fourth quarter increased nearly 9 million tons from the third quarter due to the acquisition of Jacobs Ranch. Both consolidated average sales price and operating costs declined more than $2 per ton in the fourth quarter from the sequential third quarter. Average sales price per ton declined $0.41 from the prior-quarter, due to a less favorable mix of customer shipments and lower pricing on market-priced tons. Per-ton operating costs, excluding amortization of acquired coal supply agreements, declined $0.46 quarter-on-quarter, mainly due to synergies realized to date with the acquisition. For the full year, net income attributable to the company was $42.17 million or $0.28 per share, compared to a net income of $354.33 million or $2.45 per share in the preceding year. Results for the year include the impact of Jacobs Ranch acquisition-related charges and amortization of acquired coal supply agreements. Excluding charges, adjusted net income was $63.3 million or $0.42 per share.
Annual revenues from coal sales declined to $2.58 billion from $2.98 billion last year.
Steven Leer, chairman and chief executive officer said, "Arch persevered through the worst power generation market in the last 60 years to maintain profitability in 2009. At the same time, we continued to focus upon our core values - setting new company records for safety and environmental compliance - while working aggressively to position the company for the next market rebound." Looking ahead, the company expects earnings per share on a GAAP basis between $0.37 and $0.86, which includes non-cash amortization of acquired coal supply agreements. Excluding such non-cash charges, adjusted earnings per share would be in the range of $0.50 to $1.00. Analysts expect the company to earn $1.24 per share. "While much uncertainty remains, our goals for 2010 will be to stay disciplined in cost control and capital spending, maintain financial flexibility and continue to follow a market-based approach to production and sales," added Leer. Among Arch Coal's rivals, Consol Energy, Inc. (CNX) reported yesterday a decline in fourth-quarter earnings from last, with revenues almost flat with last year. Net income attributable to the company's shareholders for the quarter slid to $143.2 million, from $176.3 million in the corresponding period last year. Earnings attributable to the company's shareholders declined to $0.78 per share from $0.97 per share in the same period last year. Total quarterly revenue and other income was almost flat at $1.238 billion compared with $1.242 billion in the same period last year.
Another peer, Peabody Energy Corp. (BTU) reported Tuesday a significant decline in its profit for the fourth quarter, impacted by a drop in coal sales. The St. Louis, Missouri-based company's fourth quarter net income attributable to common stockholders dropped to $92.2 million or $0.34 per share from $293.1 million or $1.09 per share in the same period last year. Fourth quarter revenues declined to $1.55 billion from $1.89 billion in the same quarter a year earlier. Yet another competitor, Massey Energy Co. (MEE) is slated to announce its results for the fourth quarter on February 2. Nineteen analysts expect the company to report earnings of $0.27 per share on revenues of $661.28 million for the quarter. ACI shares are currently trading at $22.76, down $1.78 or 7.25% on the NYSE. In the past 52 weeks, the shares have been trading in a range of $11.77-$28.34.
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