Bloomberg News

Alpha Cuts 2012 Coal-Shipment Forecast After Posting Loss

May 03, 2012

Alpha Natural Resources Inc. (ANR:US), the second-largest U.S. coal miner, cut its forecasts for full-year shipments and capital expenditure after posting a second straight quarterly loss as demand and prices slumped.

Alpha’s guidance ranges for shipments of metallurgical coal used by steelmakers and thermal coal burned at power stations were lowered by a combined 7.5 million tons, the Bristol, Virginia-based company said today in a statement. Alpha’s first- quarter loss excluding acquisition expenses, severance charges and other items was 27 cents, compared with the 6-cent average of 24 estimates (ANR:US) compiled by Bloomberg.

“While margins declined in every segment, met coal margins declined the most versus the previous quarter” after shipments of metallurgical coal were lower than expected, Lucas Pipes, an analyst at Brean Murray, Carret & Co. in New York who recommends buying Alpha shares, said in a note.

Alpha, which completed its $7.1 billion takeover of Massey Energy Co. in June, is among producers that have closed mines this year after record high temperatures and surging natural-gas supplies caused coal demand at U.S. power utilities to tumble. Alpha said today that requests for deferring shipments have become “commonplace.” It also said prices for immediate delivery are less than production costs in “much” of Central Appalachia and at some operations in the Powder River Basin, a region that covers parts of Wyoming and Montana.

James River

Alpha fell 4.1 percent to $14.85 at the close in New York. The shares have dropped 27 percent this year, the third-worst performer on the Standard & Poor’s 500 Index. (SPX)

The first-quarter net loss was $29.1 million, or 13 cents a share, compared with net income of $49.8 million, or 41 cents, a year earlier. Sales rose to $1.93 billion from $1.13 billion, missing the $1.9 billion average of 15 estimates.

Alpha said capital spending will be $450 million to $650 million this year, $100 million lower than previously projected.

Rival U.S. producers are also suffering from the deterioration in coal demand. James River Coal Co. (JRCC:US) said today it’s withdrawing its 2012 capital expenditure guidance because of market volatility.

Walter Energy Inc. (WLT:US), the third-largest U.S. producer, yesterday reported first-quarter earnings that trailed estimates. Arch Coal Inc. (ACI:US), the fourth-largest miner, said May 1 it will cut its dividend and make additional production curtailments.

Walter Bid?

The Telegraph reported yesterday that BHP Billiton Ltd. (BHP), the world’s largest mining company, is working on a bid for Walter, citing traders the London-based newspaper didn’t name. Susan Knight, a spokeswoman for Birmingham, Alabama-based Walter, said the company declined to comment on rumors. Walter rose 5.6 percent in New York.

Central Appalachian thermal coal futures, the U.S. benchmark, averaged $63.90 in the first quarter, 17 percent less than a year earlier.

The average price of metallurgical coal was $168.63 a ton in the first quarter, 19 percent lower than a year earlier, according to data compiled by Bloomberg. Alpha got 50 percent of its 2011 coal revenue from the steelmaking raw material.

Global steel capacity utilization averaged 79 percent in the first quarter, compared with 82 percent a year earlier, according to data from the World Steel Association.

“Markets for both metallurgical and thermal coal are under pressure, but the challenges facing the metallurgical market appear to be cyclical and could reverse quickly,” Alpha said in the statement. “The challenges facing the domestic steam coal market, on the other hand, appear to be both cyclical and structural and are likely to linger well into 2013.”

Alpha is the second-largest U.S. coal producer ranked by revenue, after St. Louis-based Peabody Energy Corp. (BTU:US)

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

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


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Companies Mentioned

  • ANR
    (Alpha Natural Resources Inc)
    • $3.45 USD
    • -0.12
    • -3.48%
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