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Arch Boosts 2011 Guidance After Beating Analyst Estimates

April 26 (Bloomberg) -- Arch Coal Inc., the second-biggest U.S. coal producer, lifted its earnings forecast for 2011 after it reported first-quarter profit of $55.9 million on higher prices for the fuel and steelmaking ingredient.

Net income was 34 cents a share, compared with a loss of $1.8 million, or 1 cent, a year earlier, St. Louis-based Arch said today in a statement. The company was expected to earn 29 cents, according to the median of six analyst estimates compiled by Bloomberg. Revenue gained 23 percent to $872.9 million.

The company, led by Chief Executive Officer Steven Leer, 58, increased its earnings forecast for the full year on higher metallurgical coal demand. Arch said it expects earnings per diluted share of between $2.03 and $2.52, and earnings before interest, taxes, depreciation and amortization to range between $930 million and $1.05 billion.

“Margins actually expanded across the board,” said Jeremy Sussman, an analyst at Brean Murray Carret & Co. in New York. “The biggest jump came in their central Appalachian operations, which is on the back of strong metallurgical coal prices in a tight market.”

Arch rose 19 cents, or 0.6 percent, to $34.01 in New York Stock Exchange composite trading. The shares have gained 22 percent in the past year.

Jacobs Ranch

Last year the company’s performance was hindered by costs related to its Jacobs Ranch acquisition and a loss in its trading operation. Metallurgical coal prices soared 74 percent to $225 a ton in the first quarter from a year earlier, according to Bank of America Merrill Lynch.

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

The company said that it restarted longwall operations at its Mountain Laurel mine in mid-April. Arch said that it encountered geological challenges at the mine, which produces the steelmaking grade.

“It was good to see the Mountain Laurel mine restart on time because that is their flagship coal mine,” Sussman said.

The company’s cash margin per ton jumped 41 percent to $6.05, it said.

Arch will devote as much as $410 million for capital expenditures, it said.

The company said in a January forecast that it expects to sell 155 million to 160 million tons of coal this year, as much as 3.9 percent lower than the 161.3 million sold in 2010.

Metallurgical Coal

The company is planning to sell at least 7.5 million tons into the metallurgical market, Leer said.

That could approach 8 million tons by 2012 as the company increases output at its eastern mines, John Eaves, Arch’s president and chief operating officer, said on a conference call with analysts and investors.

Leer said Arch is working to expand thermal coal exports and to establish ports on the U.S. West Coast to ship its coal from Wyoming’s Powder River Basin.

U.S. producers industrywide may reach 105 million tons this year, which would be the highest level since the “early 1990s,” Leer said.

Peabody Energy Corp., also based in St. Louis, is the largest U.S. coal producer.

(Arch held a conference call with analysts and investors beginning at 11 a.m. New York time. To access a Webcast of the call, go to http://investor.archcoal.com.)

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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