The decline was more than double the net loss posted in last year’s first quarter at US$7.4 million, or 14 US cents a share, compared with 34 US cents a share fall this year.

“Coal demand was weaker than anticipated in the first quarter, as power generators continued to draw down their coal stockpiles in lieu of purchasing spot coal,” Arch Coal chief executive Steven Leer said.

“As a result, Arch further curtailed production at its mining operations, with predictable consequences for our first quarter results. Nevertheless, we continue to believe that our strategic decision to leave uncommitted tons in the ground, rather than sell them at a price that does not provide an adequate return, is sound.”

Coal sales fell about 9% to 22.7 million tons whilst overall revenue fell to US$349.6 million from US$368.5 million compared to last year’s first quarter.

Heavy snows early in the year disrupting production and shipments, higher diesel fuel costs and difficult conditions at the Mingo Logan mine also hit hard the St Louis-based company’s bottom line.

Also eating into profits was a US$3.7M accounting charge resulting from adoption of asset retirement obligations.

Although Arch Coal had not forecast any miraculous recovery in earnings in the immediate future, hopes were high on improved market performance.

“With approximately 50 millions tons of planned production as yet uncommitted for 2004, we have significant leverage to an improving market environment. At the same time, we are implementing aggressive steps to reduce both overhead and operating costs,” he said.

The aggressive cost-reduction plan could include some layoffs in an attempt to trim corporate level costs by about US$6 million.

Excluding severance costs, Arch has predicted second quarter costs to range from breakeven to a loss of 10 US cents per share. Thompson First Call told Reuters analysts forecast results ranging from a loss of 16 US cents a share to a profit of 19 US cents, with a consensus of a 1-US cent profit.