Coal Miner Alpha Natural Resources Cannot Get Untracked
Alpha Natural Resources Inc. (NYSE: ANR) reported second-quarter 2013 results before markets opened this morning. The coal miner posted an adjusted diluted earnings per share (EPS) loss for the quarter of $0.59 on revenues of $1.34 billion. In the same quarter a year ago the company posted a net loss of $0.33 per share and revenues of $1.85 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for a net loss of $0.59 per share and $1.24 billion in revenues.
On a GAAP basis, the net loss totaled $0.84 per share, compared with an adjusted EPS loss of $10.14 in the year-ago quarter. The 2012 loss include about $2.5 billion in impairment and restructuring charges.
Although Alpha Natural shipped more coal in the second quarter than it did in the first quarter, margin pressures continue to rule the coal industry. Alpha noted that the global market for seaborne coal continues to be oversupplied, putting more pressure on margins, and the market for steam coal in the Atlantic basin has become uneconomic for almost all U.S. production. The final nail is that even though domestic inventories of steam coal are falling, which should lead to restocking and a more balanced supply/demand market, miners still face an oversupply issue for Appalachian coal and threatened oversupply in Powder River Basin production.
The coal miner’s CEO said:
Alpha continues to proactively address changing market conditions by optimizing our mine portfolio and idling additional uneconomic metallurgical and thermal coal capacity, and we anticipate additional actions may be required between now and the end of the year. At the same time, we remain focused on adjusting our overhead and capital expenditures in proportion with our changing operational footprint.
More mine closures and slowdowns are not what investors want to hear about.
In its outlook, Alpha Natural said it expects to ship a total of 83 million to 91 million tons of coal in 2013, which represents a small drop of 2 million tons at the top of the range. The largest portion of that will be its low-priced Powder River Basin coal. Alpha Natural’s average realized price per ton of Powder River Basin coal was $12.37 in the second quarter, and costs fell to $10.08 a ton.
The market for the higher priced metallurgical coal used in steelmaking may turn around a little now, given that production cutbacks have lowered stockpiles, particularly in China. But Alpha Natural notes that the third-quarter spot price for met coal is $145 per metric ton, a drop of $27 from the second quarter.
Shares are down 5.3% in premarket trading this morning, at $5.15 in a 52-week range of $4.82 to $10.74. The Thomson Reuters consensus target price for the shares was around $8.85 before today’s report.