Arch Coal Inc.
) reported first-quarter 2013 pro forma loss of 34 cents per
share, marginally wider than the Zacks Consensus Estimate of a
loss of 32 cents. The loss incurred in the reported quarter was
also much wider than a loss of 4 cents per share in the prior
The lingering effect of weak coal fundamentals from 2012
primarily led to unfavorable results in the first quarter.
On a GAAP basis, first-quarter loss was 33 cents compared with
earnings of a penny in the year-ago quarter. The variance between
GAAP and pro forma loss was due to a 1 cent gain related to the
amortization of acquired sales contracts.
Arch Coal's first-quarter total revenue of $825.5 million
missed the Zacks Consensus Estimate by 13.2% and fell behind the
year-ago revenue by 20.5%. The revenue decline was due to a
persistent downside in average sales price.
Arch Coal sold 34.1 million tons of coal in the reported
quarter, down 4% year over year due to 2.2% and 24.4% drop in
sales at the Powder River Basin and Appalachia, respectively.
In the quarter under review, total operating cost per ton
shrank 10.8% year over year to $21.46 due to a decline in
operating cost per ton across the company's Powder River and
Appalachia Basins partially offset by increase in cost at the
Western Bituminous region.
Costs were curtailed in several operational regions via
minimizing overtime and contractor cost, savings from consumables
and reduction in other carrying costs.
However, the cost-containment efforts proved futile due to a
steeper fall in selling price per ton, which led to declining
profit. Operating margin per ton dropped to 20 cents from $1.66
in the year-ago quarter.
The company's average sales price per ton was $21.66 in the
quarter, down 15.8% year over year. Arch Coal's adjusted earnings
before interest, tax, depreciation and amortization (EBITDA) in
first-quarter 2013 were $84 million, reflecting a substantial
year-over-year drop of 53.3%.
Cash and cash equivalents of the company as of Mar 31, 2013,
were $730.1 million versus $784.6 million as of Dec 31, 2012.
Long-term debt as of Mar 31, 2013, fell slightly to $5,082.2
million from $5,085.9 million at year- end 2012.
Operating cash flow in the first quarter declined 21.2%
sequentially to $43.2 million. As of Mar 31, 2013, the
company had available liquidity of $1.3 billion of which $1.0
billion comprised of cash and other short-term investments and
$300 million for borrowing.
Arch Coal reiterated its 2013 sales guidance in the range of
133-144 million tons of coal. This includes 125-135 million tons
of thermal coal and 8-9 million tons of metallurgical coal.
The company however lowered its full-year 2013 capital
expenditure guidance to the range of $300-$330 million from the
earlier range of $330-$360 million.
Other Coal Company Releases
Peabody Energy Corporation
) reported an operating loss of 5 cents per share in the first
quarter, narrower than the Zacks Consensus Estimate of a pro
forma loss of 14 cents per share.
CONSOL Energy Inc.
) is expected to release its first quarter results on Apr 25,
2013. The Zacks Consensus Estimate for the quarter is 19
Alpha Natural Resources Inc.
) is expected to release its first quarter results before the
market open on May 2, 2013. The Zacks Consensus Estimate for the
quarter is pegged at a loss of 59 cents.
Arch Coal's top and bottom line yet again fell short of our
expectations. However, we believe rising natural gas prices would
contract the coal-to-gas switching in the U.S. This would boost
coal sales going forward. In addition, the summer months would
lend significant upside to sales with consumption expected to go
A bullish steel market in Asia and Latin America would also
drive met coal demand, boosting Arch Coal's profits. The company
has booked 6.5 million tons of met coal in 2013.
However, strict environmental regulations will continue to
pose challenges to the company. Arch Coal Inc. currently has a
short-term Zacks Rank #3 (Hold).
St. Louis-based Arch Coal Inc. engages in the production and
sale of steam and metallurgical coal. The company also ships coal
to domestic and international steel manufacturers as well as
international power producers.
ARCH COAL INC (ACI): Free Stock Analysis
ALPHA NATRL RES (ANR): Free Stock Analysis
PEABODY ENERGY (BTU): Free Stock Analysis
CONSOL ENERGY (CNX): Free Stock Analysis
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