Metallurgical coal producer
Walter Energy Inc.
) operating loss per share of $1.68 per share in the third
quarter of 2013 was wider than the Zacks Consensus Estimate of a
loss of $1.01. In the year-ago quarter the company reported
earnings of 48 cents.
Walter Energy's total revenue of $455.8 million in the third
quarter was down 25.5% from $611.9 million in the year-ago
The decline was primary due to lower met coal prices which ate
into high coal sales volume.
The top-line results were marginally lower than the Zacks
Consensus Estimate of $458 million.
Highlights of the Quarter
During the quarter, Walter Energy's metallurgical coal production
reached 2.8 million metric tons (MMTs), increasing 7.7% from the
year-ago quarter. The output consisted of 82% met coal and 18%
pulverized coal injection (PCI) coal.
Total cash cost of met coal sales per metric ton (MT) during the
quarter was $117.95, down 10.8% from the year-ago level. This
reflects a 32.0% decline in the selling price of hard coking coal
("HCC") to $133.72 per MT and a 24.1% decline in the selling
price of low-vol PCI to $121.76 per MT.
The company continues to benefit from its cost-cutting measures.
Selling, general and administrative expenses were $21.9 million,
down 32.6% from $32.5 million in the year-earlier quarter.
Interest expenses were $63.5 million versus $30.5 million in the
prior-year quarter. The increase in expenses was primarily due to
the issue of new debts bearing higher interest rates.
The company continues to maintain a healthy cash balance. The
available liquidity at the end of the quarter was $614.0 million,
consisting of cash and cash equivalents of $293.1 million plus
$320.9 million of availability under the company's revolving
credit facility. In addition, the company amended its credit
facility in Jul 2013 to increase its financial flexibility.
During the reported quarter the company issued $450 million in
senior notes due in 2019. Long-term debt as of Sep 30, 2013 was
$2.77 billion versus $2.40 billion as of Dec 31, 2012.
In the third quarter, capital expenditure was $28.5 million, a
66.6% decline from the year-ago quarter. The decline in capital
expenditure reflects Walter Energy's capital discipline in the
face of a worldwide decline in met coal demand.
Walter Energy is on track to make capital expenditure of $150
million in 2013.
Walter Energy expects to achieve 2013 met coal production target
of 11 MMTs. The company also expects its fourth quarter coal
production to surpass the third quarter level as its Wolverine
mine is moving into a more favorable phase in its mining cycle.
The company is planning to lower its met coal production costs on
a per ton basis by 15% year over year.
Other Company Releases
Peabody Energy Corp.
) reported third quarter 2013 earnings of 5 cents per share,
widely beating the Zacks Consensus Estimate of a loss of 3 cents.
SunCoke Energy, Inc.
) released its third quarter results with earnings per share of 9
cents beating the Zacks Consensus Estimate of 7 cents by 28.6%.
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 performance of Walter Energy in the reported quarter was
lower than expected. The softness in the sales price per ton
prevented the company to realize the benefits of a higher sales
Walter has taken significant steps to cut down its operational
costs, with no debt maturities till Jun 2015. The company could
concentrate more on developing its existing assets and take more
initiatives to control expenses.
Asian countries like China, Japan and Korea will primarily drive
the demand for met coal. In Latin America, demand for met coal is
expected to rise in Brazil due to its infrastructure development
efforts for the approaching World Cup and Olympics. Though Walter
Energy is competent its ability to win contracts will be tested
as other met coal operators will also look to grab the
Walter Energy currently has a Zacks Rank #3 (Hold). With a market
capitalization of $0.96 billion, the company has 4,100 full time
ARCH COAL INC (ACI): Free Stock Analysis
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WALTER ENERGY (WLT): Free Stock Analysis
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