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Mixed 2Q at Alpha Natural Resources - Analyst Blog

Date : 08/08/2012 @ 10:45AM
Source : Zacks
Stock : Alpha Natural Resources (ANR)
Quote : 2.26  0.03 (1.35%) @ 4:07PM
Alpha Natural share price Chart

Mixed 2Q at Alpha Natural Resources - Analyst Blog

Coal producer Alpha Natural Resources (ANR) reported a loss of 33 cents per share for the second quarter of 2012, wider than the Zacks Consensus Estimate of a loss of 30 cents. The results of the company were markedly lower than the year-ago earnings of 97 cents per share.

GAAP loss during the quarter was $10.14 per share versus a loss of 32 cents per share reported in the year-ago quarter.

Total Revenue

Alpha Natural Resource’s total revenue of $1,848.1 million in the second quarter was ahead of the Zacks Consensus Estimate of $1,798 million. The top line was also higher than the year-ago figure of $1,598 million, reflecting growth of 15.6%.

Operational Update

During the reported quarter, the company expanded its total volume of coal sold. The company sold 26.8 million tons registering year-over-year growth of 16.3%. However, the average realized price per ton of coal during the quarter decreased by $2.81.

Total cost and expenses of the company in the reported quarter were $4.5 billion versus $1.6 billion in the year-ago quarter. The increase in cost was mainly due to asset impairment and goodwill impairment of a cumulative $2.5 billion.

During the quarter the company reported an operating loss of $2.6 billion, wider than a loss of $0.025 billion in the year-ago quarter. The downcast in bottom-line results is mainly a function of spiraling expenses.

Financial Update

Cash and cash equivalents of the company as of June 30, 2012 were $252.2 million versus $585.9 million as of December 31, 2011.

Long-term debt as of June 30, 2012, was $2.91 billion almost flat with $2.92 billion as of December 31, 2011.

Capital expenditure during the first half of 2012 was $245.2 million compared with $172.7 million in the comparable period, the prior year.

Cash from the operating activities during the first half of 2012 was $135.4 million versus $294.9 million in the prior-year period.

Guidance

The company now expects its 2012 coal shipment to be in the range of 100-115 million tons versus its previous range of 100-116 million tons.

Given the softness in coal demand and an expected reduction in capital purchases and leasing of selected items, the company has again reduced its 2012 capital expenditure guidance to a range of $450 million to $600 million, from the prior range of $450 million to $650 million.

Peer Comparison

Alpha Natural Resources Inc.’s peer Arch Coal Inc. (ACI) reported pro forma loss of 10 cents per share in second quarter 2012, in contrast to earnings of 44 cents per share in the year-ago comparable period. This decline was primarily due to lower sales volume related to decline in shipments from Powder River Basin (“PRB”) operations. The reported loss was, however, narrower than the Zacks Consensus Estimate of a loss of 18 cents per share.

Arch's total revenue in the reported quarter was $1,063.5 million, up 8% from $985.5 million in the year-ago quarter. Quarterly revenue surpassed the Zacks Consensus Estimate of $1,020 million.

Our View

During the reported quarter, the company decided to lower coal production from its northern and southern Kentucky business units. The decision is in sync with the announcement made by the company during its first quarter earnings call. Alpha Natural Resources announced its intention to lower coal production for 2012, taking into account declining thermal coal demand and increasing competition from natural gas owing to falling prices.

However, a recovery in natural gas prices and a warmer summer will turn around demand for coal. We believe coal stockpiles at power generating plants have also diminished enough to reinvigorate coal demand. These factors are sure to aid coal miners and operators.

Based in Abingdon, Virginia, Alpha Natural Resources Inc. along with its subsidiaries engages in the production and selling of steam and metallurgical coal in the United States. The company was founded on 2002 and has 14,000 full time employees.


 
ARCH COAL INC (ACI): Free Stock Analysis Report
 
ALPHA NATRL RES (ANR): Free Stock Analysis Report
 
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