CONSOL revises down its September quarter earnings

CONSOL has revised its earnings outlook down to US$4-8 million for the quarter just ended.

Staff Reporter

Major US coal miner CONSOL has revised down its earnings outlook for the quarter ended September 30, now forecasting net income for the quarter of US$4-8 million against US$10.7 million a year ago.

CONSOL is feeling the effect of higher costs and production shortfalls. The results have been affected by persistent adverse geologic conditions at longwall Mine 84 in south-western Pennsylvania. CONSOL said the mine has encountered a sandstone intrusion in the coal seam that has slowed both the longwall mining and the continuous mining machines at the mine.

Production was expected to be impaired by about 700,000 tons, or 50% compared with a year ago. The more difficult mining conditions also have increased costs.

Nine longwall equipment moves will be completed during the current quarter, costing the company a total of 46 lost production days, about 35% more than forecast. This includes three moves scheduled to occur later in the year but which have been brought forward because longwall mining has been completed ahead of schedule. CONSOL has 13 longwall systems in operation in the current quarter.

CONSOL said the July-September period is typically a period with high costs in the coal segment while many mines are idled for vacation. At this time, maintenance, efficiency or expansion projects are performed at the mines.

This project work also impaired production levels for several weeks but is expected to improve productivity at those mines and result in improved performance for the remainder of the year.

"Geologic conditions and longwall moves are a part of the mining business we are in," said J Brett Harvey, president and CEO. "However, I do not expect these adverse circumstances to persist."

Harvey said the company still expects that results for the full year will be consistent with its earlier forecast and with analysts' estimates.

"We have retooled our mines during the quarter and we expect the mines to run smoothly for the rest of the year. Coupled with strong performance in our gas segment, I fully expect that we will meet our goal and the expectations of investors for the year. We expect earnings to increase 10 to 15% over last year," Harvey said.

Average realised coal prices for company-produced coal are estimated to be about US60c lower this quarter than the same period a year ago, but are expected to be approximately US30c higher than in the quarter to June 2000.

Sales of CONSOL coal are expected to be 17.8 million tons, 1.8 million tons lower than in the same period a year ago, primarily due to production shortfalls. Demand for coal in CONSOL Energy's principal market areas is good, the company said.