Costs hit Walter's bottom line

A SURGE in production costs has contributed to a disappointing fourth-quarter result for metallurgical coal producer Walter Energy, with income down despite a big revenue jump thanks to the Western Coal acquisition.
Costs hit Walter's bottom line Costs hit Walter's bottom line Costs hit Walter's bottom line Costs hit Walter's bottom line Costs hit Walter's bottom line

An employee of Walter Energy. Courtesy Walter.

Andy Graham

While revenue was up from $US401 million in Q4 2010 to $700 million in Q4 2011, net income for the same periods fell from $92 million to $84 million on the back of the company’s average cash cost per ton rising from $91/t to $132/t.

Walter sold 2.4 million tonnes of met coal in Q4 2011 and 8.7Mt full-year, up from 1.5Mt and 6.3Mt respectively for the 2010 corresponding periods.

Income per share dropped from $1.72 to $1.34, lower than average analysts’ expectations of $1.50 per share, according to Bloomberg.

“Average realized pricing [of $244/t] was a little lower than we were looking for and average costs were a little higher,” Raymond James Financial analyst Jim Rollyson told Bloomberg.

Walter’s full-year revenue was a record $2.6 billion, up 62% over 2010 revenue of $1.6 billion, while 2011 net income was $349 million, down from $386 million in 2010.

The company bought Canadian miner Western Coal in April for $C3.3 billion.

"Walter Energy delivered solid growth in 2011 growing revenue by almost $US1 billion and earning a record EBITDA of $822 million," chief executive officer Walt Scheller said.

"We completed a major met coal acquisition of Western Coal, which is contributing to significant sales growth, greater global diversification and the broadening of our portfolio of mining assets.

“For 2012, we remain well-positioned to achieve record met coal production and we are on target for 11.5-13.0 MMTs [million metric tons] comprised of approximately 75% hard coking coal and 25% PCI.

“We expect more than one-third of the increase to come from Mine No. 7, just under one-third to come from our other U.S. operations and approximately one-third to come from our Canadian operations.”

Walter Energy shares on the New York Stock Exchange closed yesterday at $66.64, up 1.7%.

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