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Peabody Energy Profit Rises on Higher Coal Prices

Peabody Energy Corp., the largest U.S. coal producer, said fourth-quarter profit more than doubled on higher prices for the steelmaking component.

Net income climbed to $210 million, or 78 cents a share, from $92.2 million, or 34 cents, a year earlier, St. Louis-based Peabody said today in a statement. The company was expected to earn 76 cents a share, according to the median of seven analyst estimates compiled by Bloomberg. Sales rose 17 percent to $1.82 billion from $1.55 billion.

Peabody, led by Chief Executive Officer Gregory Boyce, 56, profited on higher metallurgical coal prices driven by demand from China and India, even as the company lost some production from its Australian operations amid flooding in Queensland.

“The quarter was fine, but certainly it’s about what people see going forward,” said Mike Dudas, an analyst at Jefferies & Co. in New York.

Dudas said Peabody stands to benefit from higher prices that should “offset costs and issues” associated with the Australian floods.

Peabody rose $1.21, or 2 percent, to $60.50 in New York Stock Exchange composite trading. The shares have increased 33 percent in the past year.

Force Majeure

The company said on Dec. 30 it declared force majeure in Queensland, a measure that allows companies to miss contracted deliveries because of circumstances beyond their control. Floods in the state are the worst in 50 years and have forced the evacuation of 4,000 people.

Peabody earlier this month said that it planned to report 2010 earnings before interest, taxes, depreciation and amortization near the midpoint of its July outlook of $1.7 billion to $1.9 billion, below the $1.85 billion to $1.9 billion it forecast in October, citing the flooding.

The flooding reduced Ebitda by about $85 million, or 22 cents per share after taxes, Peabody said. Its Wilkie Creek operation in Macalister, Queensland, was most affected by the rains, Boyce said on a conference call with analysts and investors. The mine produces thermal coal.

Queensland’s coking-coal output in the 12 months ending June 30 is forecast to be 177.3 million metric tons, down from an initial projection of 198 million tons, Mines and Energy Minister Stephen Robertson said last week.

Flood Impact

About 15 million to 20 million tons of coal-industry output may be affected because of the flooding, Boyce estimated, saying that it’s more significant than 2008 when Australia was battered by floods.

“While heavy rains and other supply disruptions create near-term logistics challenges, they also result in significant market upside for Peabody’s unpriced metallurgical and thermal export coal beyond the first quarter,” Boyce said in the statement.

Metallurgical coal is used to produce steel, while the thermal form of the fuel is consumed by utilities to generate electricity.

Peabody said that it has 7 million to 8 million tons of metallurgical coal for sale in Australia for the last three quarters of this year and that all of its projected 2012 coking coal production is open for sale.

The company has about 6 million to 7 million tons of thermal coal unpriced for this year and about 12 million to 13 million tons available for 2012, it said.

Sales Forecast

Peabody expects to sell 245 million to 265 million tons of coal this year, including 28 million to 30 million tons from Australia, it said. The company plans to sell 195 million to 205 million tons from its U.S. operations and the remainder from its trading and brokerage activities.

Anticipated sale of 265 million tons of coal would be about 7.8 percent higher than the 245.9 million it sold in 2010 and 8.8 percent higher than the 243.6 million total in 2009.

First-quarter Ebitda is expected to range from $325 million to $425 million, with adjusted earnings per share of 45 cents to 65 cents, excluding the impact of foreign tax remeasurement, Peabody said.

“First-quarter results are expected to reflect continued impacts to sales and costs related to the record Australian rains, as well as scheduled longwall moves in the United States and Australia,” the company said in the statement.

Peabody estimated that its capital expenditures for the year to be from $900 million to $950 million, which includes as much $550 million for new mines, expansion and extension projects, it said.

Arch Coal Inc., also based in St. Louis, is the second-biggest U.S. coal producer, followed by Alpha Natural Resources Inc., in Abingdon, Virginia.

(Peabody held a conference call with analysts and investors to discuss results at 11 a.m. in New York. To listen to a replay, go to the company’s website at

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