CONSOL profits down

Lower sales volumes of coal, lower sales prices and higher mining costs have been blamed for a decline in CONSOL's first quarter earnings.

Staff Reporter

CONSOL Energy, the fourth largest coal producer in the United States, has reported a larger than expected decline in first-quarter earnings. Net income totalled $US4.1 million, or 5 cents per share, in the quarter ended September 30, 2000, down from $US10.7 million, or 13c per share, in fiscal 2000's first quarter.

"As we reported in September, operational issues, including adverse geology and a large number of equipment moves at several of our mines, impaired both production and cost in our coal business," said J Brett Harvey, chief executive officer.

"We expect to see a return to more normal mining conditions during the current quarter," he continued.

Total coal sales were 18.4 million tons, of which 17.7 million tons were produced by CONSOL Energy operations or sold from inventory. This compares with total coal sales of 20.5 million tons during the same period a year ago, of which 19.6 million tons were produced from company mines or sold from inventory.

Average realised price received per ton of company-produced coal was $US23.35, compared with $23.89 for the same period a year ago. Coal production for the first quarter was 16.0 million tons, compared with 17.6 million tons in first quarter ended September 30, 1999.

Although demand for coal in CONSOL Energy's primary markets was strong during the quarter just ended, the company was unable to meet demand for coal because of coal production shortfalls. The average realised price per ton of company-produced coal fell 2.3% period to period, reflecting the impact of lower contract sales prices for several contracts that were renegotiated at the end of the second quarter of FY00.

"However, the pricing environment improved during the quarter, as evidenced by improvement in prices from the fourth quarter of FY00 to the first quarter of the current fiscal year," CONSOL said. "Average realised prices received for company-produced coal over that period improved US32c per ton, reflecting continued growth in demand for coal to generate electricity and a tightening of coal supplies in the eastern United States."

Coal production declined 1.6 million tons compared with the first quarter of the previous year. Production volumes were lower because of an unusually large number longwall moves; persistent, adverse geologic conditions at Mine 84; and construction projects at several mines at the beginning of the quarter.

Mine 84, located in south-western Pennsylvania, encountered a sandstone intrusion in the coal seam that reduced coal production from both the longwall mining machine and the continuous mining machines, the company said.

For the quarter just ended, Mine 84 produced 750,000 tons, compared with1.49 million tons in the same period a year ago.

"The situation at Mine 84 is improving," said Harvey, "but we do not expect Mine 84 to return to normal production levels until the third quarter. We have moved beyond the sandstone problems for the most part, but the longwall mining machinery at the mine will be idle for the remainder of the month while development of a new mining area is completed."

Mining costs increased to$US22.07 per ton produced in the quarter just ended, from $US21.31 in the same period a year ago. Productivity rose to 41.51 tons per man-day, compared with 40.96 tons per man-day for the same period a year ago. Longwall moves cost a total of 36 production days.

The company expects second-quarter coal sales of 18-18.5 million short tons, little changed from first quarter sales of 18.4 million. Coal production, however, is expected to rise to 17.0 million tons to 18.0 million tons from 16.0 million tons in the September quarter.

CONSOL is the largest producer of coal from underground US mines and the largest producer of coal east of the Mississippi River. The company has 22 bituminous coal mining complexes in six states and in a Canadian province. For the year ended June 2000, CONSOL had revenues of $US2.2 billion.