Walter Energy Inc.
) announced its first quarter preliminary 2013 operating results.
The first quarter results look favorable when compared to the
preceding quarter. Increased metallurgical (met) coal production
and sales, healthy prices and cost decline led the company to
post improved numbers.
Met coal sales volume surged 9% sequentially to 2.8 million
metric tons in the first quarter 2013 owing to rising demand.
Average realized metallurgical prices improved sequentially. Low
volatile hard coking coal ("HCC") was the major contributor to
the sales growth. However, lagged sale of about 700,000
metric tons at fourth quarter prices proved to be a partial drag
on the prices.
Similarly, met coal production increased 12% to 2.8 million
metric tons from the fourth quarter due to planned longwall moves
in the Alabama operations.
The decelerating cost of met coal was another positive during
the quarter. Cash cost of sales declined by over $10 per metric
ton while production expenses dropped 5% in contrast to the
fourth quarter. Higher low vol HCC and Pulverized Coal Injection
(PCI) sales helped reduce costs.
As for thermal coal, sales decreased by a sharp 40%
sequentially to 380,000 metric tons due to weak sales volume and
escalating costs. Walter Energy recorded a $35 per metric ton
increase in cash cost of sales in the first quarter from the
North River facility. The company expects the closure of this
mine to be concluded by 2013 end.
On the financial front, Walter Energy recently extended its
notes offering to $450 million, 8.5% senior notes due 2021 from
the previous $350 million to recuperate its $250 million of
outstanding debt in its credit facility and for general corporate
purposes. The company believes the gains accrued will impart
greater flexibility to its financial position.
Walter Energy is expected to benefit from a rise in demand in
the high-coal consuming countries of India, China and South
America. Coal demand is also expected to strengthen in these
developing nations on the back of a thriving steel market.
Nonetheless, the company will continue to suffer from the
lackluster thermal market which triggered production cuts in
several coal mines. Walter Energy currently carries a Zacks Rank
Other stocks performing better and are worth a look include
Zacks Ranked #2 (Buy)
Atmos Energy Corporation
The Laclede Group, Inc.
Based in Birmingham, Ala., Walter Energy produces and exports
metallurgical coal for the steel industry. It also produces
thermal and industrial coal, anthracite, metallurgical coke, coal
bed methane gas and other related products.
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WALTER ENERGY (WLT): Free Stock Analysis
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