Coal producer Alpha Natural Resources (ANR) reported a loss of 53 cents per share for the third quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 71 cents. Alpha Natural Resources had incurred a wider loss of 61 cents per share in the year-ago quarter.
GAAP loss in the reported quarter was 84 cents per share compared with a $2.07 loss in the year-ago quarter. The difference between GAAP and operating loss was due to the impact of non-cash goodwill impairment charges of nearly $253 million.
Total Revenue
Alpha Natural Resources' total revenues of $1,050.1 million in the third quarter surpassed the Zacks Consensus Estimate of $990 million by 6.1%. However, the top line declined from the year-ago figure of $1,191.1 million by 11.8%.
The year-over-year decline was primarily due to lower average realizations and lower shipments of metallurgical and PRB steam coal.
Highlights of the Release
Coal tons sold in the third quarter decreased 2.8% to 21.3 million tons. The average realized price per ton also fell 7.9% year over year to $43.36.
Cost of coal sales declined to $0.87 billion from $0.99 billion in the year-ago quarter due to effective cost savings.
Depreciation, depletion and amortization (DD&A) expenses decreased to $170.1 million during the third quarter of 2014 from $196.3 million in the year-ago period.
Guidance
Alpha Natural Resources made upward adjustments to its shipment guidance for 2014. The company now expects to ship between 79 and 86 million tons of coal, up from the previous range of 75 and 85 million tons. The company actually boosted its Eastern metallurgical and Eastern steam coal shipment guidance.
The new shipment range for 2014 comprises 17 to 19 million tons of Eastern metallurgical coal, 28 to 30 million tons of Eastern steam coal, and 34 to 37 million tons of Western steam coal out of the PRB.
SG&A expenses are expected to range from $130 million to $140 million for 2014. Interest expense is expected to be in the range of $275 million to $290 million.
Capital expenditure is expected in the range of $225 million to $275 million for 2014 and $275 million to $350 million for 2015.
Other Company Release
Arch Coal Inc. (ACI) reported third-quarter 2014 adjusted loss of 45 cents, wider than the Zacks Consensus Estimate of a loss of 41 cents per share.
CONSOL Energy Inc. (CNX) reported operating earnings of 9 cents per share for the third quarter of 2014, lagging the Zacks Consensus Estimate of 20 cents by 55%.
Peabody Energy Corporation (BTU) reported a loss per share of 59 cents in the third quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 66 cents.
Our View
In the reported quarter, Alpha Natural Resources benefitted from its cost saving initiatives despite a decline in selling price and volumes. Railroad congestions in the PRB continued to pose challenges.
Earlier this month China reintroduced tariffs on coal imports to safeguard the interest of domestic coal producers. China levied a 3% tariff on coking coal and a 6% tariff on thermal coal imports, which could impact the future export opportunities of the company.
Global met coal demand is expected to fall further in 2015. Per a recent release from the World Steel Association, global steel usage is expected to decline to 2% from the previous expectation of 3.3%. The decline in steel usage is likely to impact the met coal shipment of the company in 2015.
Similarly, the thermal coal market is yet to show signs of improvement. The mild summer months in the U.S. and expectation of a normal winter this year might further dampen the thermal coal prospects.
Alpha Natural Resources currently holds a Zacks Rank #3 (Hold).
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