Metallurgical coal producer
Walter Energy Inc
) operating earnings per share in the third quarter of 2012 were
48 cents versus $1.21 reported in the year-ago quarter. Earnings
were lower than the Zacks Consensus Estimate of 55 cents.
GAAP loss during the quarter was $16.97 per share versus earnings
of $1.39 per share reported in the year-ago quarter.
The difference between operating and GAAP earnings during the
quarter under review was due to a non-cash goodwill impairment
charge of $1.1 billion and a charge of $40 million for
abandonment of a natural gas exploration project. The results
during the quarter included a $41 million tax benefit.
Walter Energy's total revenue of $611.9 million in the third
quarter was lower than $688.7 million reported in the year-ago
The year-over-year decline was due to global slackness in the
demand for coal accompanied by an excess of supply. The
contribution from the Canadian and U.K. operations of the company
dropped 41.1% year over year.
The top-line results were also lower than the Zacks Consensus
Estimate of $669 million.
Sales and Production
During the quarter, Walter Energy's metallurgical coal production
reached 3.33 million metric tons (MMTs), up 47% from the year-ago
quarter. The production consisted of 71% met coal and 29%
pulverized coal injection (PCI) coal.
Sales volume during the reported quarter touched 2.62 MMTs
comprising 2.18 MMT of HCC and the balance PCI.
During the quarter the company successfully implemented
cost-cutting measures. Selling, general and administrative
expenses were $32.5 million, down 24.6% from $43.1 million in the
Third quarter operating profit at Walter Energy totaled $34.9
million, down sharply 77.9% from the same period last year, due
to operating losses incurred at its Canadian and U.K. operations.
Interest expenses were $30.5 million versus $27.6 million in the
The company continues to maintain a healthy cash balance. Cash
and cash equivalents as of September 30, 2012 were $129.9 million
versus $128.4 million as of December 31, 2011.
Long-term debt as of September 30, 2012 was $2.28 billion versus
$2.27 billion as of December 31, 2011.
In the third quarter, capital expenditure was $85.2 million
compared with $156.9 million in the year-ago quarter. The decline
in capital expenditure reflects Walter Energy's capital
discipline in the face of a worldwide decline in coal demand.
The capital expenditure target of the company for 2012 is $400
million. Keeping in mind the sputtering global economy, the
company has decided to lower its capital expenditure for 2013 to
Cash from operating activities during the first nine months of
2012 was $333 million versus $509.6 million in the year-ago
Arch Coal, Inc.
), another operator in the coal sector, reported pro forma
earnings of 20 cents per share for the third quarter of 2012
versus earnings of 17 cents per share in the year-ago comparable
period. The results were significantly higher than the Zacks
Consensus Estimate of a loss of 15 cents per share.
Arch's total revenue of $1,087.6 million in the third quarter
2012 was lower than the year-ago figure of $1,198.7 million.
However, the top line was higher than the Zacks Consensus
Estimate of $1,033.0 million.
The slackness in demand for coal globally has impacted the
performance of the company. With the uncertain recovery of the
coal market, we expect the company to trim its production level
in the upcoming quarter to clear the inventory of both HCC and
Following the same thesis, the company has cut its production
guidance for 2013 from estimated 2012 levels.
Losses incurred at the U.K. and Canadian operations have also
weighed upon the company. Earnings have missed our expectation in
three out of the last four quarters. These trends show there will
be no recovery soon in the coming months. With no near-term
positive catalyst the stock currently retains a short-term Zacks
#5 Rank (Strong Sell rating.)
Birmingham, Alabama-based Walter Energy is one of the leading
U.S. producers and exporters of premium met coal catering to the
global steel industry. With a market capitalization of $2.28
billion, the company has 4,200 full time employees.
ARCH COAL INC (ACI): Free Stock Analysis
WALTER ENERGY (WLT): Free Stock Analysis
To read this article on Zacks.com click here.