Peabody Posts Surprise Profit After Rebound in U.S. Coal Demand

Peabody Energy Corp. (BTU), the largest U.S. coal producer, reported a surprise second-quarter profit as demand at domestic power utilities rebounded.

The net income of 33 cents a share compared with a profit of 78 cents a year earlier, the St. Louis-based company said in a statement today. The profit was compared with the 5-cent loss that was the average of 23 analysts’ estimates compiled by Bloomberg.

Sales fell to $1.73 billion from $1.98 billion, trailing the $1.81 billion average of 13 estimates.

U.S. coal consumption rose 9.5 percent in the quarter, according to U.S. Department of Energy’s Energy Information Administration data. The EIA expects domestic use to increase 6.7 percent this year as electricity demand climbs and prices rise for natural gas, a competing fuel burned at power plants.

Coal from Peabody’s U.S. operations is cheaper for utilities to burn than gas, the price of which has almost doubled from a decade low in April 2012.

“Where they produce their coal is now well in the money versus natural gas,” Jeremy Sussman, an analyst at Clarkson Capital Markets in New York, said by phone before the results were announced.

The price of coal produced in the Powder River Basin mining region in the western U.S., where Peabody operates its most productive U.S. mines, averaged $10.60 a short ton in the quarter, 35 percent higher than a year earlier, according to data compiled by Bloomberg.

Peabody is among U.S. coal-mining companies betting that rising gas prices and a hotter North American summer boosts domestic coal use after the industry shut down operations and cut jobs in 2012 amid plummeting consumption of the fuel after mild weather and low gas prices reduced demand.

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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