Metallurgical coal producer
Walter Energy, Inc.
(
WLT
) announced its second quarter 2012 guidance. In this quarter, the
company forecasts that financial performance will be flat due to
lower pricing, partially offset by sequentially unchanged per ton
cost of production and a few favorable non-operating gains.
Separately, the company reiterated its full year 2012 metallurgical
coal production estimate.
In the second quarter of 2012, Walter Energy expects
metallurgical coal production to increase more than 10% year over
year from 2.5 million metric tons ("MMTs") to 2.8 MMTs. The company
produced 2.4 MMTs of metallurgical coal in the first quarter of
2012. Including the impact of previously priced tons from past
quarters, the company expects about $200 per MT for hard coking
coal ("HCC"), down 12% quarter over quarter and $160 per MT for
low-volatile ("vol") pulverized coal injection ("PCI"), down 15%
sequentially.
For full year 2012, Walter Energy reaffirmed its total
metallurgical coal production range of 11.5 - 13 MMTs. Of this, it
expects 75% to be HCC and 25% to be low-vol PCI.
The company expects total capital expenditure for 2012 to be
$450 million. Total steel production in the top 10 producing
countries is expected to increase 10% as compared to February 2012,
resulting in higher demand for high quality metallurgical coal in
the near term. In addition, the company expects global coal price
to improve on the back of tightening of metallurgical coal
supplies, reduction in steel inventories and improvements in global
steel pricing.
We view Walter Energy Inc. as a well-positioned organization
with a strong project pipeline in the U.S., Canada, and U.K. The
company has decided to shift coal production to more profitable
mines in Alabama in the U.S. and Canada, which is expected to
negate the impact of higher production cost.
Walter Energy's acquisition of Western Coal on April 1, 2011
will enable it to strengthen its metallurgical coal portfolio
related to addition of high quality metallurgical coal from mines
in Northeast British Columbia in Canada and in West Virginia, U.S.;
high quality anthracite coal in South Wales, UK and compliant
thermal coal from mines located in West Virginia, U.S. Walter
Energy is expected to produce an average of 20 MMTs per year by the
end of this decade. Western Coal has access to high-growth
steel-producing countries in Asia, South America and Europe. The
company can comfortably leverage this opportunity to fortify its
diverse geographical footprint.
As per the Zacks Consensus Estimates, Walter Energy's second
quarter and full year 2012 earnings are pegged at 87 cents and
$4.41 per share, respectively.
Walter Energy, Inc. currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating. The company competes with
Arch Coal, Inc.
(
ACI
).
Birmingham, Alabama-based Walter Energy, Inc. is one of the
leading U.S. producers and exporters of premium metallurgical coal
to the global steel industry.
ARCH COAL INC (ACI): Free Stock Analysis Report
WALTER ENERGY (WLT): Free Stock Analysis Report
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