Arch Coal Reports Improved Earnings in Fourth-Quarter 2017, to Increase CAPEX

Researched by Industrial Info Resources (Sugar Land, Texas)--Arch Coal Incorporated (NYSE:ARCH) (St. Louis, Missouri) on Tuesday reported fourth-quarter 2017 net income of $81.3 million, up from $33.4 million in the prior-year period. Part of the improvement came from a net tax benefit of $34.8 million resulting from the U.S. tax reform act that was passed in December, the coal producer said. Industrial Info is tracking more than $300 million in active Arch Coal projects.

For the first full year since its public relisting after exiting bankruptcy in 2016, the company reported net income of $238.5 million.

Fourth-quarter revenues reached $560.2 million on 23.5 million tons of coal sales. Chief Executive Officer John Eaves said in a press statement the company benefited in the fourth quarter improved performance at its metallurgical mines and "positive momentum" in international coking coal and thermal coal markets.

However, harsh winter conditions at the end of last year along the U.S. East Coast hampered metallurgical coal shipments, company officials said during Arch Coal's earnings conference call. As a result, the company was unable to ship 200,000 tons of coking coal during this period. Eaves said the company expects to make up for those shipments in the first half of 2018. Metallurgical coking volumes declined 17% when compared with the third quarter.

Metallurgical coal continues to trade in a "very strong range," the company said in its earnings statement, and international thermal markets remain strong on growing Asian demand.

For 2018, the company said it expects total sales of between 92 million and 99 million tons, including 6.4 million to 7.0 million tons of metallurgical coal, which is in line with its sales in 2017.

Capital expenditures for 2018 are expected to run between $80 million to $90 million, in comparison with $59 million in 2017.

Industrial Info is tracking Arch Coal's proposed $300 million Lost Prairie underground thermal coal mine project near Pickneyville, Illinois. The project currently has a construction kickoff date of early 2019, with completion by the end of 2020, but Industrial Info has assessed the project as having a low probability of moving forward as planned. The kickoff date has slipped 93 months from the originally planned kickoff date. Production at the mine would ramp up from 800,000 tons per year to 3.5 million tons over a five-year period. For more information, see Industrial Info's project report.

Some U.S.-based coal producers have reported improved markets in the face of daunting conditions, including the U.S. Power Industry's move toward natural gas as the fuel of choice, and away from coal. Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) reported fourth-quarter net income of $317.4 million, a substantial swing from its $192.7 million loss in fourth-quarter 2016.

However, Alliance Resource Partners, L.P. (NASDAQ: ARLP) (Tulsa, Oklahoma) reported its fourth-quarter net income dropped to $74.2 million from $119.6 million in fourth-quarter 2016, due to reduced coal sales volumes and prices. Alliance says it is the largest coal producer in the Illinois Basin and the second-largest coal producer in the eastern U.S. For related information, see November 27, 2017, article - U.S. Coal Production, Industry Profits Rise in the Third Quarter.

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