Peabody Energy Experiences Second-Best Year, Expansion Ahead

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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite dips in both quarterly and annual income, executives at Peabody Energy (NYSE:BTU) (St. Louis, Missouri), the world's largest private-sector coal company, say the company performed strongly overall for 2009, with results that were second only to 2008. Income from continuing operations, not deducting net interest expense, income taxes, asset retirement obligations, depreciation, depletion and amortization, was $297.4 million for the fourth quarter of 2009, a 40.95% drop year-over-year, and $1.29 billion for the year, a 30.15% drop from 2008.

Total revenues were $1.55 billion in the fourth quarter, down 17.9% year-over-year, and $6.01 billion for 2009, an 8.4% drop from 2008. Peabody sold 61.2 million tons of coal in the company's U.S. mining, Australian mining, trading and brokerage operations during the fourth quarter, down 11.7% year-over-year. The company sold 243.6 million tons in the full year, a 4.47% drop from 2008. The lower numbers belie Peabody's second-strongest yearly performance, as 2008 was the strongest in the company's history.

Results were stronger in the second half of 2009, which saw a 37% rise in Australian coal volumes and increased metallurgical coal sales to Asian nations, particularly China. The year also saw an 11% rise in U.S. revenues per ton, which partly stemmed from multi-year contracts that were locked in at favorable prices.

Peabody is targeting sales of 240 million to 260 million tons in 2010. U.S. volumes are expected to be 185 million to 195 million tons, and Australian sales are expected to increase by 26 million to 28 million tons. Capital expenditures for 2010 are estimated to be between $600 million and $650 million.

"We are in a new paradigm, and I am convinced China will remain a significant importer, based on domestic need, strategic intent, and aggressive actions to acquire resources outside its borders," said Greg Boyce, president and chief executive officer of Peabody.

Boyce is optimistic about Peabody's future in China and India, citing Australian operations that give the company access to expanding seaborne metallurgical and thermal coal markets. The company believes China and India do not have enough metallurgical coal to meet demand, and will continue to turn to Australia for imports. Australia is the world's largest exporter of coal, having increased its 2009 shipments to a record 277 million tons--and rising. China imported 34 million tons of metallurgical coal in 2009, far greater than the 3 million tons in 2008.

Boyce added that the company has a large presence in the Powder River and Illinois basins, the fastest-growing and least-expensive U.S. regions. Peabody expects U.S. coal consumption to increase by 60 million to 80 million tons in 2010.

Industrial Info is tracking nine active Peabody projects in the U.S. and Australia worth $3.9 billion, including the $400 million grassroot Bear Run surface coal mine near Dugger, Indiana, which is set to include a 2 million- to 3 million-ton-per-year open pit mine and a 2,000-ton-per-hour prep plant. Information on this and other projects can be found in Industrial Info's North American Industrial Database.

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