Walter Says It Has Enough Liquidity Amid Weak Coal Market
Walter Energy Inc. (WLT), a metallurgical coal producer that hasn’t been profitable in two years, said it has enough liquidity to survive the weak market for the steelmaking ingredient and that industry efforts to cut excess supply are working.
Walter had $563.9 million in cash, cash equivalents and available funds under its credit facilities at the end of the second quarter, the company said in a statement today.
“There’s no liquidity concerns in our company at this point,” Chief Executive Officer Walter J. Scheller III said in a conference call. There will be no “fire sale” of assets, he also said.
Walter is among metallurgical-coal producers contending with global prices for the commodity that are at a six-year low because of cooling Chinese demand and new mines coming on line. Shares of the Birmingham, Alabama-based company have slumped 66 percent this year and Standard & Poor’s said last month that Walter’s level of debt is “unsustainable.”
In April, the company started idling Canadian mines that produced 3.6 million tons of coal in 2013. Industrywide, about 20 million tons of metallurgical-coal cuts have been announced this year, helping to reduce excess supply, Scheller said.
“Given the projects that are coming online and the announced cuts, I think we might be pretty close to balanced once it all works its way through,” he said.
Most mining companies believe that 10 million to 15 million tons of additional cutbacks are needed to achieve a balanced market, Michael Dudas, an analyst for Sterne Agee & Leach Inc., said in a July 28 note.
Walter’s second-quarter net loss widened to $151.4 million, or $2.33 a share, from $34.5 million, or 55 cents, a year earlier. Excluding one-time items, the loss was $1.97 a share, worse than the $1.69 average of 18 analysts’ estimates compiled by Bloomberg. Sales dropped 14 percent to $378.4 million, beating the $376.6 million average estimate.
The company reduced its metallurgical-coal sales forecast for this year to 9.5 million to 10.5 million tons, from 10.5 million to 11.5 million tons previously. Walter said the main reason was the shutting in June of its principal coal transportation provider at the Brule mine in Canada.
The company’s $350 million of 11 percent second-lien notes due April 2020, dropped 5.5 cents on the dollar today to 71.75 cents to yield 19.4 percent at 12:26 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Walter shares fell 2.2 percent to $5.75 in New York.
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