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Released April 22, 2015 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Arch Coal Incorporated (NYSE:ACI) (St. Louis, Missouri) pared back its expected sales volumes for 2015, citing softened international metallurgical and thermal prices, and a continued drop in coal consumption by U.S. power plants.
Industrial Info is tracking three active Arch Coal projects, with a combined worth of $403.5 million, and 14 existing mine plants. The Tucker Run underground metallurgical coal mine, located near Grafton, West Virginia, is in the permitting phase. The project will not move forward until there is sufficient demand. When market conditions warrant its construction, a 500,000-tonne to 600,000-tonne-per-year underground room and pillar coal mine would be built at the 33-acre site. The investment value of the project could run as high as $300 million to $400 million.
Arch said it now expects thermal sales volumes for 2015 to be in the range of 120 million to 130 million tons, compared with its earlier forecast range of 124 million and 136 million tons. The company lowered its metallurgical coal sales guidance to between 6 million and 6.8 million tons for 2015, compared with its earlier forecast of between 6.3 million and 7 million tons. The company said it is more than 95% committed on thermal sales, and 75% committed on metallurgical sales for the full year.
Arch reported some improvement in first-quarter 2015 results, with a net loss of $113 million, compared with a net loss of $124 million in the same quarter of 2014. Adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) was $82 million, the company said, a threefold increase from the first quarter of 2014. Revenues totaled $677 million, down from nearly $736 million a year earlier.
Arch Chief Financial Officer John Drexler said, "As part of an ongoing review of our costs, we again reduced our capital and administrative spending during the three months ended March 31, 2015, enabling us to lower spending expectations for full year 2015."
The company lowered its capital expenditure (capex) guidance for the year by $5 million. It now expects to spend between $140 million and $155 million.
Arch had available liquidity of $1.1 billion as of March 31, including cash and short-term investments of $939 million and undrawn borrowings on its credit facilities. "We are focused on managing our available liquidity through these difficult conditions," Drexler said.
Arch officials said seaborne thermal and metallurgical prices have continued to soften, and supply outpaced demand growth in the international thermal and metallurgical markets. Global steel production has declined 1% since the start of the year, the company said, marked by weakness in Europe and Asia. Steel mill utilization rates in the U.S. were well below their five-year average, executives said during the company's earnings conference call, with no recovery seen until 2016.
Arch Chief Executive Officer John Eaves said during the company's earnings conference call that industry-wide coal exports from the U.S. will reach less than 90 million tons in 2015, compared with 2014 export levels of nearly 100 million tons, with metallurgical exports accounting for most of the reduction. He added there were some positive signs in the international marketplace, with roughly 23 gigawatts of coal-based power generation under construction in India.
Also, U.S. annual coal consumption for power generation is expected to drop by 80 million tons this year, due to the impact of natural gas supplies and new environmental regulations, Arch said.
"As a result of these factors, utility stockpiles increased by an estimated 10 million tons during the first quarter and are expected to build further over the course of the year," according to the company's earnings statement. "Mine Safety and Health Administration data suggests that total domestic production decreased by 13 million tons in the first quarter of 2015, versus the fourth quarter of 2014. Arch expects coal-supply reductions to continue and accelerate as the year progresses."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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.
Industrial Info is tracking three active Arch Coal projects, with a combined worth of $403.5 million, and 14 existing mine plants. The Tucker Run underground metallurgical coal mine, located near Grafton, West Virginia, is in the permitting phase. The project will not move forward until there is sufficient demand. When market conditions warrant its construction, a 500,000-tonne to 600,000-tonne-per-year underground room and pillar coal mine would be built at the 33-acre site. The investment value of the project could run as high as $300 million to $400 million.
Arch said it now expects thermal sales volumes for 2015 to be in the range of 120 million to 130 million tons, compared with its earlier forecast range of 124 million and 136 million tons. The company lowered its metallurgical coal sales guidance to between 6 million and 6.8 million tons for 2015, compared with its earlier forecast of between 6.3 million and 7 million tons. The company said it is more than 95% committed on thermal sales, and 75% committed on metallurgical sales for the full year.
Arch reported some improvement in first-quarter 2015 results, with a net loss of $113 million, compared with a net loss of $124 million in the same quarter of 2014. Adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) was $82 million, the company said, a threefold increase from the first quarter of 2014. Revenues totaled $677 million, down from nearly $736 million a year earlier.
Arch Chief Financial Officer John Drexler said, "As part of an ongoing review of our costs, we again reduced our capital and administrative spending during the three months ended March 31, 2015, enabling us to lower spending expectations for full year 2015."
The company lowered its capital expenditure (capex) guidance for the year by $5 million. It now expects to spend between $140 million and $155 million.
Arch had available liquidity of $1.1 billion as of March 31, including cash and short-term investments of $939 million and undrawn borrowings on its credit facilities. "We are focused on managing our available liquidity through these difficult conditions," Drexler said.
Arch officials said seaborne thermal and metallurgical prices have continued to soften, and supply outpaced demand growth in the international thermal and metallurgical markets. Global steel production has declined 1% since the start of the year, the company said, marked by weakness in Europe and Asia. Steel mill utilization rates in the U.S. were well below their five-year average, executives said during the company's earnings conference call, with no recovery seen until 2016.
Arch Chief Executive Officer John Eaves said during the company's earnings conference call that industry-wide coal exports from the U.S. will reach less than 90 million tons in 2015, compared with 2014 export levels of nearly 100 million tons, with metallurgical exports accounting for most of the reduction. He added there were some positive signs in the international marketplace, with roughly 23 gigawatts of coal-based power generation under construction in India.
Also, U.S. annual coal consumption for power generation is expected to drop by 80 million tons this year, due to the impact of natural gas supplies and new environmental regulations, Arch said.
"As a result of these factors, utility stockpiles increased by an estimated 10 million tons during the first quarter and are expected to build further over the course of the year," according to the company's earnings statement. "Mine Safety and Health Administration data suggests that total domestic production decreased by 13 million tons in the first quarter of 2015, versus the fourth quarter of 2014. Arch expects coal-supply reductions to continue and accelerate as the year progresses."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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.
