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Arch Coal Inc. (ACI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
Arch Coal Inc. reported loss in both fourth-quarter as well as full-year 2013, primarily due to a decline in revenues and higher interest expenses. Primarily reduction sales volume, lower sales pricing, disruptions of rail services and the effect of geological challenges at the Mountain Laurel mine contributed towards the unfavorable performance. On the positive side, implementation of long wall technique at Leer mine is expected to boost production from first-quarter 2014. Arch Coal can use coal produced from this mine to meet demand from Middle East and emerging markets. In addition, Arch continues to focus on cost-control measures, which will likely provide consistence to its future margins. However, increase in competition from Australia and Indonesia, and tighter environmental legislation might pose challenges for Arch. We maintain our Neutral recommendation on the stock.
St. Louis, Mo.-based Arch Coal Inc. (ACI) is one of the largest coal producers in the U.S., operating 23 mines across major low-sulfur coal basins of the country. It also owns a 42% interest in Knight Hawk Holdings, a coal producer in the Illinois Basin. In 2012, Arch Coal sold 140.8 million tons of coal, including 4.3 million tons of coal sourced from third parties. The company typically sells coal to power plants, steel mills and industrial facilities under long-term contracts. At year-end 2012, the company had above 5 billion tons of metallurgical (met) and thermal coal reserves. The company expanded its operations during 2011 by acquiring International Coal Group Inc. which operates primarily in the Appalachian region of the U.S.
Arch Coal primarily conducts its business through three operating segments: Powder River Basin (PRB), having operations in northeastern Wyoming and southeastern Montana Western Bituminous (WBIT), having operations in western Colorado, eastern Utah and southern Wyoming and, Central Appalachia (CAPP), having operations in eastern Kentucky, Tennessee, Virginia and southern West Virginia. Coals mined from the PRB region have very low sulfur content and low heat value. Western Bituminous coals usually have a low sulfur content and varying heat value. Central Appalachia produces coals, which have low sulfur content and high heat value. However, Arch Coal sells a part of the coal mined in the CAPP region as metallurgical coal (met coal) to steel producers. Met coal has low sulfur content, high heat content, low expansion pressure and several other chemical properties. Met coal commands premium prices.
Arch Coal Inc. (ACI): Read the Full Research Report
ARCH COAL INC (ACI): Free Stock Analysis Report
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