Arch financials affected by rail problems

RAIL disruptions throughout the US were cited as having an impact on industry giant Arch Coal’s second quarter results, announced July 25, with its profits plunging 82% primarily because the disruptions slowed shipments from its mines.
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Outgoing Arch CEO Steven Leer.

Donna Schmidt

Revenue, however, did see a 50% increase from $US422.8 million during the same quarter last year to $US633.8 million. Sales volumes also increased to 34.6 million tons, versus 26.4Mt during the same period last year.

Arch noted the decreased revenue, which it originally publicized July 15, in its quarterly earnings statement. “As previously announced, Arch’s performance during the second quarter was hampered by highly publicised rail disruptions in both the east and the west,” said Arch president Steven Leer. “Those disruptions were most pronounced in the Powder River Basin of Wyoming, where shipments from our Black Thunder mine were reduced by a total of 3.8Mt and production was curtailed by approximately 2Mt.”

Vice president John Eaves was satisfied with the productivity of its mines over the quarter, saying, “Our mining operations achieved a solid overall performance”, despite problems at its Mingo Logan mine, plagued with water-related problems for most of the quarter after a longwall move in the early part of this year. “After an improved performance in June and a good start to July, we are confident Mingo Logan has overcome these operational challenges,” said Eaves.

The company also noted that the bulk of its coal supply agreements were due to expire between now and 2008, allowing them to reset to market-based pricing and conduct low-cost production throughout the country. “We expect these developments to drive progressively stronger earnings and cash flow over that time period, and to create significant new value for our shareholders,” said Leer.

Arch, the second largest coal producer in the US, provides the fuel for some 7% of the country’s generated electricity.