Alliance posts record profit but cuts output, spending

DESPITE posting record profits for the March quarter, Alliance Resource Partners says it will cut production and spending this year, including pushing back longwall start-up at the Tunnel Ridge operation in Pennsylvania.
Alliance posts record profit but cuts output, spending Alliance posts record profit but cuts output, spending Alliance posts record profit but cuts output, spending Alliance posts record profit but cuts output, spending Alliance posts record profit but cuts output, spending

Courtesy Alliance Resource Partners.

Angie Tomlinson

Alliance cut its expected 2009 revenues to $US1.29-1.37 billion, profit to $240-280 million and coal production to 27.1-27.5 million tons. Capital expenditure was also cut to $375-425 million.

“We are seeing very little spot buying activity for 2009 and most of our customers are cautious about predicting 2010 demand levels for coal,” Alliance CEO Joseph Craft III said.

“In response, ARLP is adjusting its production and sales estimates for the balance of 2009 to reflect reduced demand.”

The adjustments will include reducing overtime and moving a production unit in the second half of this year from one of the company’s western Kentucky operations to its new River View mine.

The move will allow Alliance to stay on schedule for planned development at River View while reducing output.

The company has also adjusted the construction schedule at its Tunnel Ridge mine to coincide initial continuous miner development production with completion of the coal preparation plant in mid-2010. Longwall production at Tunnel Ridge is now anticipated to begin in late 2011.

Despite the cutbacks, Alliance managed to produce a record March quarter. Net income rose 68% to $72.5 million on the back of high coal contract pricing. Coal sold averaged $48.59/t.

"These results are particularly gratifying in light of the challenges created by the continuing global recession and the disruptive ice storm that hit western Kentucky during the quarter,” Craft said.

“Looking ahead, even though reduced electricity generation and falling natural gas prices have resulted in lower coal demand and weakened spot coal prices, we remain optimistic that Alliance will achieve substantial year-over-year growth in earnings and cash flows in 2009.”

Revenues for the quarter were up 16.1% to $329.3 million, while operating expenses increased to $196.4 million due to higher sales-related expenses, materials and supply costs, and maintenance costs.

Coal sales slipped for the quarter, down to 6.4Mt.

Coal sales volumes in the Illinois Basin were affected by weather disruptions in western Kentucky, particularly at the Dotiki, Warrior and Elk Creek mines.

The disruptions, coupled with unplanned customer outages, contributed to increased Illinois Basin coal inventory.

Alliance said lower sales volumes and increased coal inventory in the Central Appalachian region reflected delays in scheduled coal shipments.

In the Northern Appalachian region, lower than anticipated spot market sales in the March quarter affected sales volumes and coal inventory.