Massey Energy Co. (MEE) on Tuesday reported a 49% decline in profit for the fourth quarter compared to last year as the weak global economy and lower energy demand from electric utilities and steelmakers resulted in lower revenues. The company maintained its outlook for fiscal 2010 produced coal shipments, but raised its outlook for metallurgical coal shipments.
The Richmond, Virginia-based coal miner reported net income for the fourth quarter of $24.4 million or $0.28 per share, down from $47.7 million or $0.56 per share in the year-ago period.
The results for the latest quarter include the impact of a $6.0 million reserve for bad debt.
On average, nineteen analysts polled by Thomson Reuters expected the company to earn $0.27 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenue for the fourth quarter fell 22.6% to $583.9 million from $755.0 million in the same period last year. Analysts had a consensus revenue estimate of $661.28 million for the quarter.
Don Blankenship, Massey's Chairman and Chief Executive Officer, said, "We were pleased with our control of costs and our positive cash generation during the fourth quarter in spite of very difficult market and operating conditions. We are pleased to have improved our market position, balance sheet and regional reserve position in 2009. We look forward to continued improvement in all of these critical categories in 2010."
Among others in the industry, Consol Energy, Inc. (CNX) reported in late January a decline in profit for the fourth quarter with revenue almost flat with last year. Net income attributable to the company's shareholders declined to $143.2 million or $0.78 per share from $176.3 million or $0.97 per share a year ago. Total quarterly revenue and other income was $1.238 billion, compared with $1.242 billion in the same period last year.
Massey said that produced coal revenue for the fourth quarter dropped to $498.7 million from $640.0 million a year earlier. However, average produced coal revenue per ton for the latest quarter increased to $64.13 from $62.69 a year ago, driven by realized price increases for utility and industrial coal as well as an increase in the proportional mix of metallurgical coal sold.
Average cash cost per ton increased to $49.87 from $48.27 in the year-ago period, due largely to higher fixed cost absorption on lower total tons sold during the period.
Massey said it sold 7.8 million produced tons of coal in the quarter, down from 10.2 million tons in the quarter of last year. The weak global economy and lower total energy demand from electric utilities and steelmakers weighed on the quarterly sales volumes. In addition, weather, weather-related power outages and disruption of rail and ocean transport significantly impacted Massey's operations.
Operating cash margin per ton was $14.26, down 1% from $14.42 reported in the prior-year period. The lower cash margin resulted as revenue per ton increased by 2%, but average cash cost per ton increased by 3%. As at December 31, 2009, Massey's cash and cash equivalents were $665.8 million, up from $640.0 million at September 30, 2008 and higher than $607.0 million at December 31, 2008. The company had $10.9 million invested in the Reserve Primary Fund at year-end, which is classified as a short-term investment.
Massey reduced total debt by $5.2 million and net debt by $30.3 million during the fourth quarter. For the full year, net debt was reduced by $98.9 million.
For fiscal year 2009, Massey reported net income of $104.4 million or $1.22 per share, up from $47.8 million or $0.58 per share last year.
The results for the year include a non-cash gain of $24.9 million from the Laurel Creek reserve and asset exchange which was recognized in the third quarter, and $12.2 million in pretax income recognized in the first quarter from the receipt of black lung excise tax refunds. The prior year's results included a pretax charge of $250.1 million related to a specific legal case that has since been concluded.
Analysts expected the company to report earnings of $1.03 per share for the year.
Total revenue for the year declined to $2.69 billion from $2.99 billion in the prior year, and missed analysts' consensus revenue estimate of $2.75 billion.
Massey's capital expenditures for the year totaled $274.5 million, down from $736.5 million in the prior year.
Massey has been reducing costs through the idling of higher cost mines, limitation of overtime, selective general and administrative cost reductions, renegotiation of supply contracts and significant wage and benefit reductions. The company has cut about 700 jobs in 2009.
The company's produced coal shipments for the year were 36.7 million tons, down from 41.1 million tons in the prior year. Massey had earlier said it expects produced coal shipments for the year in a range of 37.5 million tons-38.5 million tons.
For fiscal year 2010, the company continues to project produced coal shipments in a range of 37.0 million-41.0 million tons, with average produced coal realization now between $67.00 and $70.00 per ton.
Massey now expects metallurgical coal shipments for the year in the range of 10 million-12 million tons, up from the previous estimate of 8 million-10 million tons, due to improving conditions in the global metallurgical coal markets.
The company said it has about 39.6 million tons of coal committed for sale in 2010. Of these, 33.8 million tons are sold and priced at an average price of approximately $64.00.
Massey said it anticipates having opportunities to increase its market share in the Atlantic basin as rapid economic growth in Asia increases total energy demand and absorbs more of the coal exported from Australia and Africa.
For fiscal year 2011, Massey projects produced coal shipments in the range of 37.0 million-44.0 million tons, with average produced coal realization between $70.00 and $76.00 per ton.
MEE closed Tuesday's regular trading session at $42.10, up $0.52 or 1.25% on a volume of 6.36 million shares. In the past 52 weeks, the stock has been trading in a range of $9.62-$51.24.
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