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Alpha Loss Smaller Than Estimated After Coal Mine Costs Drop

Alpha Natural Resources Inc., the second-biggest U.S. coal producer, posted a smaller-than-estimated first-quarter loss after it sold more of the commodity to steelmakers and cut expenses by shutting higher-cost mines.

The loss excluding restructuring costs and other one-time items was 47 cents a share, the Bristol, Virginia-based company said in a statement today. That compares with the 57-cent average loss of 23 analysts’ estimates compiled by Bloomberg. Sales fell to $1.33 billion from $1.93 billion, exceeding the $1.32 billion average of 14 estimates.

Alpha has cut about half of its production in the central Appalachian region since it purchased Massey Energy Co. in 2011 to boost sales of coal used in steelmaking. Alpha’s sales volume fell 19 percent to 22.9 million tons in the quarter while metallurgical-coal sales rose 3.1 percent to 5.05 million tons.

“The restructuring plan we announced in September of 2012 is largely behind us, and we’ve taken many necessary steps to align our business with current market conditions,” Chairman and Chief Executive Officer Kevin Crutchfield said in the statement.

Alpha fell 4.6 percent to $7.13 at the close in New York. Coal mining companies fell, led by exporters of metallurgical coal after Chinese manufacturing expanded at a slower pace last month. Walter Energy Inc., a producer of the steelmaking ingredient, dropped 3.9 percent. Cliffs Natural Resources, the largest U.S. iron-ore producer, dropped 5.7 percent.

The final April reading of 50.4 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with 51.6 for March and the preliminary reading of 50.5 given April 23. The National Bureau of Statistics and China Federation of Logistics and Purchasing yesterday reported a drop to 50.6. A number above 50 indicates expansion.

Longwall Mines

The company’s net loss widened to $110.8 million, or 50 cents per share, from $28.8 million, or 13 cents, a year earlier. The cost of coal sales declined 29 percent to $1.01 billion.

Excluding merger-related expenses, the cost of the commodity sold fell 8.8 percent at Alpha’s eastern division, which comprises mines in Kentucky, West Virginia, Pennsylvania and Virginia. Cost of sales fell 8.6 percent in the Powder River Basin, an area than straddles states including Wyoming, where Alpha operates two mines.

Alpha had “strong” production from longwall mines in Pennsylvania, which accounted for a larger share of the company’s eastern-division output, the company said. Coal miners use longwall machines to remove larger volumes of coal from bigger deposits than other underground mining techniques.

Peabody Energy Corp. is the biggest U.S. coal producer by revenue.

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