Peabody Posts Surprise Sales Gain as Coal Shipments Increase

Jul 22, 2014 4:24 pm ET

(Updates with closing share price in fifth paragraph.)

July 22 (Bloomberg) -- Peabody Energy Corp., the largest U.S. coal company, reported a surprise increase in revenue for the second quarter on higher sales volumes from mines in Australia and the western U.S.

Sales rose 1.9 percent to $1.76 billion, the St. Louis- based company said in a statement today, exceeding the $1.63 billion average of 12 analysts’ estimates compiled by Bloomberg. Peabody’s loss excluding one-time items was 28 cents a share, compared with the 29-cent average estimate. The shares gained the most in two months.

The volume of metallurgical coal shipped from Australia rose 17 percent in the period. Volumes from the western U.S., where Peabody extracts coal that’s sold to power utilities, gained 6.6 percent.

Chairman and Chief Executive Officer Greg Boyce said on a conference call with analysts that 1.3 million tons of metallurgical coal sales were carried over from the first quarter. The quarterly price benchmark for the steelmaking ingredient was higher in the first quarter, at $143 a metric ton. The price was agreed at $120 a ton for the second and third quarters.

Peabody fell 0.9 percent to $15.18 in New York. The shares have declined 22 percent this year.

Despite today’s positive surprise on revenue, Peabody is still among U.S. coal producers that have fallen into unprofitability because of the headwinds facing the industry. Its second-quarter net loss was $73.3 million, or 27 cents a share, compared with net income of $90.3 million, or 33 cents, a year earlier.

Disappointing Forecast

Metallurgical coal prices are at a six-year low amid a supply glut. At the same time, low-cost natural gas has taken market share from electricity-producing thermal coal.

Peabody said today its third-quarter loss per share excluding one-time items will be 40 cents to 53 cents. That’s wider than the 19-cent loss average of 20 analysts’ estimates compiled by Bloomberg.

The company said lower coal prices and the move of three longwalls -- large underground mining machines -- will weigh on its performance in the current quarter. The possibility of further delays to rail shipments out of the Powder River Basin in Wyoming could also crimp future earnings, the company said.

Bonds Jump

Peabody’s $1.3 billion of 6.25 percent senior unsecured notes due 2021 jumped to 97.51 cents on the dollar at 11:44 a.m. in New York, an increase of more than 1.5 cents from yesterday’s price of 95.75 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The $1.5 billion of 6 percent senior unsecured notes due 2018 lifted 1 cent to 103.01 cents on the dollar at 11:46 a.m. in New York from 102 cents yesterday, according to Trace.

--With assistance from Laura J. Keller in New York.