Market continues to batter Alpha

A WEAK stream of revenue did no favours for Alpha Natural Resources’ third quarter – with the Virginia-based producer posting a significantly widened year-on-year loss but noting it has taken further aggressive steps to cut costs.

Donna Schmidt

In its earnings report for the period ended September 30, the company reported a $US458.2 million net loss, sizably larger than its $46.1 million loss during the same period last year.

Revenues were $1.2 billion for the period, down from $1.6 billion in 2012’s third quarter, and coal revenues totalled $1 billion, down from $1.5 billion in the year-ago period. It cited lower average realisations for metallurgical and steam coal and lower shipments of both Eastern and Western steam coal for the drops.

Metallurgical coal shipments were 5Mt in the third quarter, versus 4.9Mt year-on-year and 5.6Mt in the prior quarter of this year.

In the PRB, it shipped 10.1Mt in the period, down from 13.2Mt in the comparable 2012 quarter but up from 8.8Mt in the second quarter.

Eastern steam coal shipments were 6.7Mt, down from 9.8Mt in the year-ago period, and also a slight drop from 7.2Mt in the second 2013 quarter.

On the pricing side, Alpha recorded $94.73 for met shipments, a drop from $129.96 year-on-year and as well as the second quarter, which was $100.95.

The producer said that the change is due to more than one factor, a combination of lower quarterly prices for export shipments and reduced high quality shipments partly due to a work stoppage at a customer's facility.

In the PRB, average per-tonne realisations were $12.58, compared with $12.87 in the third quarter last year and $12.37 in the prior quarter.

Per-tonne average realisation for Eastern steam coal shipments was $63.21, down from $66.40 in the year-ago period and $62.54 in the prior quarter.

Chairman and chief executive officer Kevin Crutchfield said that it had a great quarter in terms of safety, and a not-so-great quarter from market headwinds, it is looking ahead with a bit more optimism.

“Although our third quarter results this quarter reflect the tough market environment and downtime at our Cumberland mine, we are encouraged that the metallurgical coal market appears to be gradually improving from its recent apparent low point, and domestic thermal coal inventories have trended down, planting the seeds for healthier market conditions in the future," he said.

“Regardless, we are not standing still and we continued to make significant progress this quarter enhancing our competitiveness and flexibility by managing those aspects of our business within our direct control.”

It also made strides in the quarter, including returning the Cumberland longwall to full production in mid-August, at the early end of the company’s projected timeframe, and developed a plan to further reduce operating and support expenses by at least $200 million annually in 2014 and beyond.

It also reduced capital expenditures, which it now projects will be between $260 million and $290 million in 2013.

Looking ahead, Alpha said it planned to ship 86-91Mt whole-year, including 20-21Mt of Eastern metallurgical coal, 28-30Mt of Eastern steam coal and 38-40Mt of western PRB coal.

The company has also reduced its guidance ranges for its Eastern and Western adjusted cost of coal sales per tonne; guidance for Eastern tonnage has been reduced to $71-73, down from the previous range of $72-76.

It has reduced guidance for Western sales per tonne to a range of $9.75-10/t from $10-10.50/t.

Its capex outlook has also been reduced to $260 million to $290 million whole-year, from an earlier range of $275 million to $325 million.

In its introduction of 2014 guidance, Alpha officials said it is currently projecting coal shipments between 79- 90Mt. That includes 18 to 22Mt metallurgical coal and 24-28Mt Eastern steam.

It also is estimating between 37-40Mt of PRB tonnage.