EARNINGS PREVIEW: US Coal Firms Seek Access Abroad
April 11 2011 - 11:56AM
Dow Jones News
TAKING THE PULSE: Relatively low natural gas prices continue to
crimp demand for the thermal coal used in power plants, so mining
companies instead are looking to meet robust demand in other parts
of the world. U.S. producers have been scrambling to find shipping
terminals to access the growing Asian market for the metallurgical
coal used in steelmaking, while Appalachian companies stand to
benefit from the recent nuclear power plant crisis in Japan, which
has at least temporarily boosted European demand amid a broad
backlash against nuclear power. The main constraint on shipments
could end up being barge and rail capacity rather than access to
ports, however, according to an analysis by Dahlman Rose &
Co.
Meanwhile, the Obama administration has rattled many coal
companies with curbs on Appalachian mountaintop removal permits,
citing water pollution, though a government plan to lease lands in
Wyoming with an estimated 758 million tons of low-sulfur coal won
rare praise from the industry.
COMPANIES TO WATCH:
Massey Energy Co. (MEE) - report expected April 18
Wall Street Expectations: Analysts polled by Thomson Reuters are
expecting a profit of 62 cents a share on $916 million in revenue.
A year earlier, the company posted earnings of 39 cents on $688.6
million in revenue.
Key Issues: Massey's shares shot up after Alpha Natural
Resources Inc. (ANR) offered $7.1 billion in cash and stock for the
Appalachian mining company, which still faces problems stemming
from an April 2010 mine explosion that killed 29 workers. The
Justice Department is conducting a criminal investigation into the
accident while federal and state safety officials investigate its
cause. Meanwhile, the company swung to an unexpected loss in the
fourth quarter on lower margins and charges related to the
explosion, which has spurred tougher safety standards that drove up
costs.
Peabody Energy Corp. (BTU) - reports April 19
Wall Street Expectations: Analysts polled by Thomson Reuters are
expecting a profit of 60 cents a share on $1.73 billion in revenue.
A year earlier, the company posted earnings of 50 cents--52 cents
on an adjusted basis--on $1.52 billion in revenue.
Key Issues: The largest U.S. coal producer by output has pinned
growth hopes on sales to Asia, where supplies keep tightening amid
surging demand. The company can tap the regional market from its
foothold in Australia, though severe flooding there at the end of
last year forced many producers to miss shipments. Peabody has
already said the damage to mines and rail links will lower sales
and raise costs in the first quarter, but overall results are still
projected to rise following recent improvement in operating
margins.
Arch Coal Inc. (ACI) - reports April 26
Wall Street Expectations: Analysts polled by Thomson Reuters are
expecting a profit of 34 cents a share on $837 million in revenue.
A year earlier, the St. Louis-based company posted a penny
per-share loss, or a 3-cent profit excluding charges from left-over
contracts related to an acquisition, on $711.9 billion in
revenue.
Key Issues: Arch posted three quarters of surging profits in
2010 following a year of dismal shipping volume, but problems
returned late last year as the company complained of lessened
revenue due to poor rail service in the eastern U.S.
Lower-than-planned production at its Mountain Laurel mine and the
loss of a federal clean-water permit at its Spruce No. 1 mine have
also weighed on the company's top line. Arch has invested in export
facilities that offer supply lines to Asia, seeking a toehold in
markets where demand for coal is still booming. It was one of two
contenders vying for Appalachian producer Massey Energy but lost to
large metallurgical coal producer Alpha Natural Resources.
Consol Energy Inc. (CNX) - reports April 28
Wall Street Expectations: Analysts polled by Thomson Reuters are
expecting a profit of 73 cents a share on $1.39 billion in revenue.
A year earlier, the company posted earnings of 54 cents, or 85
cents excluding asset purchase costs and other impacts, on $1.24
billion in revenue.
Key Issues: Profits at the fifth-largest U.S. coal miner by
production slid all last year on higher costs, but the company
expects to gain from higher metallurgical coal prices in the first
quarter after flooding in Australia hit global supplies. Still,
Macquarie Group said the producer might benefit more by selling its
peripheral steelmaking coal reserves than developing them itself.
Consol is also staking much of its future on natural gas, buying
exploration and production assets in the gas-rich Marcellus shale
formation.
Alpha Natural Resources Inc. (ANR) - report expected May 4
Wall Street Expectations: Analysts polled by Thomson Reuters are
expecting a profit of 92 cents a share on $1.07 billion in revenue.
A year earlier, the company posted earnings of 12 cents, or 69
cents excluding items such as merger costs and a charge related to
the then-enacted federal health-care law, on $922 million in
revenue.
Key Issues: Alpha is poised to become the world's third-biggest
producer of metallurgical coal once it closes its planned $7.1
billion merger with Massey Energy, right as demand for the material
picks up and supplies stretch thin. The company says the deal has
received all needed antitrust approvals and should close in the
middle of this year. Alpha recently raised its 2011 shipment target
for metallurgical coal, even as shipments for last year were on the
low end of previous guidance.
(The Thomson Reuters estimates and year-earlier results may not
be comparable because of one-time items and other adjustments.)
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909;
Andrew.FitzGerald@dowjones.com
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