Peabody Profit Forecast Misses Estimates as Coal Prices Fall

Jan 30, 2014 4:21 pm ET

(Updates with closing share price in sixth paragraph.)

Jan. 30 (Bloomberg) -- Peabody Energy Corp., the largest U.S. coal producer, forecast first-quarter earnings that missed analysts’ estimates as the price of coal used in steelmaking falls on rising supplies. The shares fell.

Adjusted earnings before interest, taxes, depreciation and amortization will be $170 million to $230 million, St. Louis- based Peabody said today in a statement. Analysts expected Ebitda of $240.8 million, the average of five estimates compiled by Bloomberg.

“The outlook is pretty weak,” David Gagliano, a New York- based analyst at Barclays Plc, said today in a phone interview. “Some of it is explainable because of the poor prices that we already know about in Australia, but prices have gone down since the first-quarter settlement.”

The benchmark contract price between steelmakers and Australian miners including BHP Billiton Ltd. for metallurgical coal was settled at $143 a metric ton for the first quarter, according to Doyle Trading Consultants LLC, a New York-based coal researcher. That’s 13 percent less than the $165 agreed upon by the BHP/Mitsubishi Alliance a year earlier.

The spot price of the steelmaking ingredient dropped to $133.50 a ton on Jan. 17, according to the most recent data available from IHS Energy Publishing Inc.

Peabody fell 2.9 percent to $16.89 at the close in New York. The shares have declined 14 percent this year.

‘A Little Disappointing’

The Australian operations provided 41 percent of Peabody’s revenue in 2013, according to the company. Peabody will increase metallurgical-coal shipments from its Australian mines to as much as 17 million tons, from 15.9 million this year, the company said.

“It’s a little disappointing that they didn’t take any volume out of the Australian metallurgical coal market,” Gagliano said. “With prices as low as they are, I would have expected them to at least flag the potential for cutting met- coal production.”

In the fourth quarter, Peabody’s net loss narrowed to $565.7 million, or $2.12 a share, from $1 billion, or $3.78, a year earlier. Profit excluding one-time items was break even, better than the average of 21 estimates for a 10-cent loss. Sales dropped 14 percent to $1.74 billion, still beating the $1.76 billion average of 11 estimates.

Revenue from the company’s Australian segment dropped 20 percent to $716.5 million as the segment’s shipments dropped 7.2 percent to 9 million tons.

Low Prices

Adjusted Ebitda in the company’s trading and brokerage segment plunged to $700,000 from $119.7 million a year earlier after “sustained levels of low volatility and pricing in the seaborne markets,” Peabody said in the statement.

The company said in December that 2013 earnings would be about $60 million to $80 million lower than an October forecast because of the impact of a labor dispute at its Metropolitan mine and delays in commissioning machinery at Peabody’s North Goonyella mine in Australia. Peabody had forecast full-year Ebitda of $1.07 billion to $1.15 billion excluding one-time items.

--Editors: Steven Frank, Jasmina Kelemen