Bloomberg News

Alpha Natural, Walter Slump After Cutting Coal Forecasts

September 21, 2011

(Updates with closing share price in second paragraph.)

Sept. 21 (Bloomberg) -- Alpha Natural Resources Inc. and Walter Energy Inc., two U.S. producers of coal used in steelmaking, tumbled after they respectively cut output and sales forecasts because of mining disruptions.

Shares of Alpha fell $4.62, or 17 percent, to $22.30 at 4 p.m. in New York Stock Exchange composite trading. Walter declined $8.75, or 12 percent, to $66.25.

Alpha’s full-year production will be 102.5 million to 109.5 million tons, compared with a previous prediction of 104 million to 112 million tons, the Abingdon, Virginia-based company said today in a statement. Alpha cited “unexpectedly curtailed customer activity” in Asia and lower-than-expected output from some mines.

Walter’s second-half sales will be “similar” to the 5.2 million metric tons recorded for the first half, the Birmingham, Alabama-based company said in a statement. Its previous forecast for second-half sales was 5.9 million tons.

Alpha and Walter are both trying to integrate mines bought earlier this year in separate acquisitions. Alpha bought Massey Energy Co. for $7.1 billion in June and said today output from some Central Appalachian Massey mines has disappointed. Walter purchased Western Coal Corp. for C$5.3 billion ($5.31 billion) in April, giving it production in British Columbia. Rainfall in the Canadian province has curbed output, Walter said today.

‘Difficult’ Geology

Walter said third-quarter earnings will be $1 to $1.16 a share. The average of 15 analysts’ estimates compiled by Bloomberg was for $3.24. Walter forecast fourth-quarter earnings of $2.63 to $2.95 a share. The average from the analysts’ estimates was for $3.17.

The company said it’s dealing with “difficult” geology at its Mine Number 7 in Alabama.

“It is possible these challenges could tempt a large company to look to buy Walter’s world-class assets ‘‘on the cheap,’’ Jeremy Sussman and Lucas Pipes, analysts at Brean Murray Carret & Co. in New York, said in a note today. They maintained their ‘‘hold’’ rating for Walter and ‘‘buy’’ recommendation for ‘‘Alpha.’’

Walter jumped 21 percent on Sept. 7 after the London-based Times said Anglo American Plc and BHP Billiton Ltd. may be considering takeover bids. Walter investor Audley Capital Advisors LLP said in July that the company should explore a sale.

The company said Sept. 12 it appointed Walter J. Scheller III as chief executive. Keith Calder resigned as CEO on June 30, citing differences of opinion with the board concerning ‘‘management philosophy.’’

Alpha completed the Massey acquisition 14 months after an explosion at Massey’s Upper Big Branch mine in West Virginia killed 29 people, the deadliest coal accident in 40 years.

--Editors: Jasmina Kelemen, Steven Frank

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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