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Released April 23, 2014 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Arch Coal Incorporated (NYSE:ACI) (St. Louis, Missouri), a leading, diversified coal company, faced declining coal prices and a tight global market in the first quarter of 2014, as the company sold several major interests, particularly in its Appalachia segment. Arch Coal reported net losses of $124.14 million, compared with losses of $70.05 million in the first quarter of 2013.
Arch Coal executives stressed that the company's performance was in the black when using the "adjusted EBITDA" method, although it still was down significantly when applying this measurement to the same period last year. The method excludes the effects of income taxes (and benefits), interest expenses, depreciation, depletion and amortization. Adjusted EBITDA stood at $27.61 million for the first quarter, compared with $83.63 million in first-quarter 2013.
Total revenues were reported to be $735.97 million, an 18.97% decrease from the same period last year. Although Arch Coal's total sales of 31.4 million tons were only slightly lower than first-quarter 2013's sales of 31.9 million tons, the overall per-ton cash margin fell to $1.70 from $3.03 last year. The steepest loss was in the Appalachia segment, where the company sold its thermal mining complex in Hazard, Kentucky, in March and its ADDCAR Systems LLC equipment-manufacturing subsidiary in February:
Capital expenditures for the quarter were reported to be $14.45 million, which is dramatically pared back from the $54.52 million spent in first-quarter 2013.
Industrial Info is tracking more than $400 million in projects involving Arch Coal, including the $10 million expansion of the West Elk Coal Mine and Preparation Plant in Somerset, Colorado. The project involves expanding into a 1,700-acre leased area for an extra 10.1 million tons of recoverable coal, which is expected to extend the life of the underground mine by two years. The mine currently has a 6 million-metric-ton-per-year capacity, but is not permitted to go beyond 8.5 million metric tons per year.
"Current price levels are unsustainable for much of the 325 million tons of seaborne metallurgical production in operation today," said John Eaves, the president and chief executive officer of Arch Coal, in a conference call. "Yet, despite some of the supply corrections that have taken place, we expect the metallurgical markets to remain soft throughout 2014. In order to successfully navigate these markets, we've elected to pro-actively scale back our metallurgical coal volumes still further this year.
"We're not the only producer electing to cut back production. In fact, with the settlement of the second-quarter metallurgical benchmark, announcements of production rationalizations and idlings have grown, from Australia, Canada and the U.S. We expect more to follow."
Arch Coal executives expect capital expenditures for full-year 2014 to be between $180 million and $190 million, slightly lower than the less-than-$200 million estimate made at the end of 2013. Thermal sales volumes for the year are expected to be between 124 million and 132 million tons, unchanged from previous estimates. Company executives see the domestic thermal market improving this year, based on rising demand for power generation, higher prices for natural gas, and a continuing decline in coal stockpiles.
"Our long-term positive outlook on metallurgical markets remains intact, despite the softness in the near-term," Eaves said. "Several trends are driving this optimism. The U.S. steel utilization is trending above the five-year average, and auto sales are projected to reach nearly 16.5 million units in 2014, the highest level since 2006. So our main market for metallurgical coal demand is healthy."
He later added: "Despite weakness in international thermal prices, the outlook for the domestic thermal market has improved. This pickup in the domestic demand should help to offset weaker prices in the seaborne thermal market."
For more information, visit Industrial Info's North American Metals and Minerals Project Database.
View Plant Profile - 1017486
View Project Report - 300096828
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Arch Coal executives stressed that the company's performance was in the black when using the "adjusted EBITDA" method, although it still was down significantly when applying this measurement to the same period last year. The method excludes the effects of income taxes (and benefits), interest expenses, depreciation, depletion and amortization. Adjusted EBITDA stood at $27.61 million for the first quarter, compared with $83.63 million in first-quarter 2013.
Total revenues were reported to be $735.97 million, an 18.97% decrease from the same period last year. Although Arch Coal's total sales of 31.4 million tons were only slightly lower than first-quarter 2013's sales of 31.9 million tons, the overall per-ton cash margin fell to $1.70 from $3.03 last year. The steepest loss was in the Appalachia segment, where the company sold its thermal mining complex in Hazard, Kentucky, in March and its ADDCAR Systems LLC equipment-manufacturing subsidiary in February:
- The Power River Basin segment sold 25.7 million tons in first-quarter 2014, compared with 26.6 million tons in first-quarter 2013. The per-ton cash margin was $1.28, down from $2.03 in the same period last year.
- The Appalachia segment sold 3.6 million tons in first-quarter 2014, compared with 3.4 million tons in first-quarter 2013. The per-ton cash margin was $2.22, down from $7.60 in the same period last year.
- The Bituminous Coal segment sold 2.1 million tons in first-quarter 2014, compared with 1.9 million tons in first-quarter 2013. The per-ton cash margin was $6, down from $8.89 in the same period last year.
Capital expenditures for the quarter were reported to be $14.45 million, which is dramatically pared back from the $54.52 million spent in first-quarter 2013.
Industrial Info is tracking more than $400 million in projects involving Arch Coal, including the $10 million expansion of the West Elk Coal Mine and Preparation Plant in Somerset, Colorado. The project involves expanding into a 1,700-acre leased area for an extra 10.1 million tons of recoverable coal, which is expected to extend the life of the underground mine by two years. The mine currently has a 6 million-metric-ton-per-year capacity, but is not permitted to go beyond 8.5 million metric tons per year.
"Current price levels are unsustainable for much of the 325 million tons of seaborne metallurgical production in operation today," said John Eaves, the president and chief executive officer of Arch Coal, in a conference call. "Yet, despite some of the supply corrections that have taken place, we expect the metallurgical markets to remain soft throughout 2014. In order to successfully navigate these markets, we've elected to pro-actively scale back our metallurgical coal volumes still further this year.
"We're not the only producer electing to cut back production. In fact, with the settlement of the second-quarter metallurgical benchmark, announcements of production rationalizations and idlings have grown, from Australia, Canada and the U.S. We expect more to follow."
Arch Coal executives expect capital expenditures for full-year 2014 to be between $180 million and $190 million, slightly lower than the less-than-$200 million estimate made at the end of 2013. Thermal sales volumes for the year are expected to be between 124 million and 132 million tons, unchanged from previous estimates. Company executives see the domestic thermal market improving this year, based on rising demand for power generation, higher prices for natural gas, and a continuing decline in coal stockpiles.
"Our long-term positive outlook on metallurgical markets remains intact, despite the softness in the near-term," Eaves said. "Several trends are driving this optimism. The U.S. steel utilization is trending above the five-year average, and auto sales are projected to reach nearly 16.5 million units in 2014, the highest level since 2006. So our main market for metallurgical coal demand is healthy."
He later added: "Despite weakness in international thermal prices, the outlook for the domestic thermal market has improved. This pickup in the domestic demand should help to offset weaker prices in the seaborne thermal market."
For more information, visit Industrial Info's North American Metals and Minerals Project Database.
View Plant Profile - 1017486
View Project Report - 300096828
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
