Alpha Results Exceed Estimates After Coal Exports Rise
Alpha Natural Resources Inc., the second-biggest U.S. coal producer by revenue, reported fourth- quarter results that beat analysts’ estimates as the company reduced production costs.
The net loss narrowed to $127.6 million, or 58 cents a share, from $792.9 million, or $3.62, a year earlier, the Bristol, Virginia-based company said today in a statement. The loss excluding impairment and restructuring charges and other one-time items was 19 cents a share, beating the average of 24 estimates compiled by Bloomberg for a loss of 49 cents. Sales fell 25 percent to $1.56 billion, topping the $1.55 billion average estimate.
Alpha’s cost of coal sales in its eastern segment, including mines in Kentucky, West Virginia and Pennsylvania, fell 13 percent to $68.55 after the company shut down high-cost mines in the region as demand and prices slumped. The company’s costs in Wyoming’s Powder River Basin were little changed at $9.43.
“The key highlight here is just good cost performance in the eastern coal segment,” said Kuni Chen, an analyst at CRT Capital Group in Stamford, Connecticut. “They’ve done a good job getting to that cost improvement fairly quickly. You saw a very big sequential decline in their costs. That’s encouraging.”
Alpha, which became the country’s largest producer of metallurgical coal with its $6.67 billion 2011 purchase of Massey Energy Co., is working to grow sales and exports of the commodity used in steelmaking.
Alpha said in September it would shut eight mines, cutting 1,200 jobs and 16 million tons of output, as U.S. demand fell amid mild weather and low natural gas prices.
Central Appalachian thermal coal, the U.S. benchmark, fell 11 percent to average $63.07 a ton in the fourth quarter from a year earlier on the New York Mercantile Exchange. An increase in gas produced from U.S. shale-rock formations helped drive prices for that fuel, which competes with coal at power plants, to a decade-low closing price of $1.907 per million British thermal units in April.
The results were released before the start of regular trading in New York, where Alpha rose 5.1 percent to $8.92 at 8:34 a.m. The shares declined 13 percent this year through yesterday.
U.S. coal producers exported 19 percent more of the fuel in the first 11 months of 2012 than in the prior year, according to the most recent data available from the U.S. Energy Information Administration. U.S. exports of thermal coal to Europe jumped as the average quarterly price of U.K. natural gas, an alternative power-generating fuel, climbed to its highest in at least five years.
Alpha plans to ship 81 million to 92 million tons this year, including 19 million to 22 million tons of metallurgical coal while spending $300 million to $350 million in capital expenditures.
“They’re still going to lose money for the year ahead, but at least you don’t have a situation where the numbers are going to further decline from here,” CRT’s Chen said in a telephone interview today.
Peabody Energy Corp., based in St. Louis, is the biggest U.S. coal producer.
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