Arch Coal Inc.
) reported third-quarter 2013 loss of 1 cent per share, much
narrower than the Zacks Consensus Estimate of a loss of 30 cents.
The company had however reported earnings per share of 20 cents
in the prior-year quarter.
The prevailing oversupply in the global metallurgical (met)
coal market led to the earnings underperformance.
On a GAAP basis, the third-quarter loss was 61 cents compared
with earnings of 22 cents per share in the year-ago quarter. The
variance between GAAP and pro forma loss was due to a 95 cent
impact from asset impairment and mine closure costs, a 1 cent
gain related to the amortization of acquired sales contracts and
a 34 cent gain from tax adjustments.
Arch Coal's third-quarter total revenue of $791.3 million
trailed the Zacks Consensus Estimate by 11.7% and year-ago
revenues by 18.8%. The revenue decline was attributed to a 23.6%
drop in the average sales price per ton of coal.
Arch Coal saw a modest 2.14% year-over-year rise in sales
volumes to 38.3 million tons in the reported quarter. Increased
sales from Powder River Basin ("PRB") led to the revenue growth.
This was partially offset by lower sales volume from the
Appalachia and Western Bituminous operations.
In the quarter under review, total operating cost per ton
plunged 17.6% year over year to $19.37 due to successful cost
containment measures at the company's PRB, Appalachia as well as
Western Bituminous basins.
Despite the stringent cost control measures, operating margin
per ton shrank 91.8% to 17 cents from the year-ago quarter. The
decline resulted from lower operating margins across three basins
of Arch Coal.
Arch Coal's adjusted earnings before interest, tax,
depreciation and amortization (EBITDA) in third-quarter 2013 were
$193.4 million, reflecting a substantial year-over-year decline
Cash and cash equivalents of the company as of Sep 30, 2013,
were $1,133.1 million versus $784.6 million as of Dec 31, 2012.
Long-term debt as of Sep 30, 2013, fell marginally to $5,074.4
million from $5,085.9 million at year-end 2012.
Operating cash flow in the first nine months of 2013 declined
47.6% to $186.6 million from $356.4 million in the first nine
months of 2012. As of Sep 30, 2013, the company had
available liquidity of $1.6 billion of which $1.4 billion
comprised cash and other short-term investments thanks to Arch
Coal's divestiture of the Canyon Fuel subsidiary in the third
Arch Coal revised its 2013 thermal coal sales guidance to the
range of 134-137 million tons from the prior 130-137 million
tons. Considering the lingering weakness in the metallurgical
coal market, Arch Coal has decreased its met coal shipments
guidance to the range of 6.9-7.3 million tons from the prior
range of 7.7-8.3 million tons.
The overall outlook however reflects a steady contraction in
coal stockpiles. Arch Coal expects stockpiles to reach 150
million tons by the end of 2013 which might pave the way for a
more balanced U.S. thermal market.
Arch Coal anticipates coal exports to slow down in the second
half of 2013 and estimates export volumes to be in the range 105
million to 110 million tons in 2013. The company tightened its
full-year 2013 capital expenditure guidance to the range of
$290-$300 million from the previous range of $280-$310
Other Coal Company Releases
Peabody Energy Corp.
) reported operating earnings of 5 cents per share in the third
quarter, surpassing the Zacks Consensus Estimate of a loss of 3
cents per share.
SunCoke Energy Inc.
) posted third quarter earnings per share of 9 cents, beating the
Zacks Consensus Estimate of 7 cents.
Alliance Resource Partners, L.P.
) reported third quarter 2013 earnings of $1.50 per unit which
lagged the Zacks Consensus Estimate of $1.75 by 14.3%.
To Sum Up
Arch Coal will continue pursuing its cost control plans- a key
factor in tackling the coal market challenges. Arch Coal's
strategic purchase of the Gruffy properties adjacent to its
Tygart Valley asset along with the longwall start-up in the Leer
mine in Appalachia will bolster its production capabilities by
The long-term prospects for metallurgical coal remain bullish
with increased demand from the Asian markets anticipated in the
coming years. Europe is expected to become more stable in 2014
which will provide additional avenues for export growth.
However, mounting pressure from environmental regulations will
continue to act as a headwind. Arch Coal Inc. currently retains a
Zacks Rank #3 (Hold).
ARCH COAL INC (ACI): Free Stock Analysis
ALLIANCE RES (ARLP): Free Stock Analysis
PEABODY ENERGY (BTU): Free Stock Analysis
SUNCOKE ENERGY (SXC): Free Stock Analysis
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