Arch Coal Shares Surge After 2Q Beat Despite Soft Volumes
Arch Coal (NYSE:ACI) reported better-than-expected second-quarter profit and sales and was upbeat on the remainder of 2012, led by much tighter costs that helped offset a sharp decline in sales volumes.
The coal producer reported a net loss of $435.5 million, or $2.05 a share, compared with a year-earlier profit of $6.3 million, or 4 cents.
But excluding $526 million in one-time charges related to mine closures, asset impairment and restructuring, Arch earned 10 cents, ahead of the 18-cent loss predicated by analysts on average in a Thomson Reuters poll.
Revenue for the three months ended June 30 climbed 8% to $1.06 billion from $985 million a year ago, topping the Street’s view of $998 million. They were partially offset by a 14% decline in sales volume from the same period in 2011.
Arch made efforts to control costs and improve operational efficiencies during the quarter to help mitigate negative impacts from expected lower volume levels. During the quarter, Arch grew its liquidity position and extended near-term debt maturities, while closing higher-cost thermal mining complexes and curtailing production by idling five mines in Appalachia.
“Arch is successfully managing through unprecedented soft coal market conditions domestically and abroad," the company’s chief executive, John Eaves, said in a statement. "We are executing on our strategy to navigate near-term challenges and emerge as a stronger, more competitive company when markets rebound.”
Shares of Arch Coal jumped 13% Friday morning to $6.00 but are still down about 58.5% from January.
St. Louis, Mo.-based Arch reduced full-year metallurgical coal sales expectations to 7.5 million tons, citing “uncertainties in the global macroeconomic environment.”
However, Eaves anticipates “better balance” in 2012’s second half in the domestic thermal market as the coal supply shrinks, demand for power in the U.S. grows and coal exports out its domestic market improve.
Arch said it could end the year with domestic stockpiles below 175 million tons, the level at which it entered 2012. It maintained its thermal coal volume guidance of 128 million to 132 million tons and narrowed the capital spending forecast to $410 million to $430 million.