For 2006 Peabody posted a 45% increase in full-year earnings to $US2.29 per share, excluding the Excel acquisition. With the Excel purchase – where the company acquired more than 500 million tons of proven and probable reserves – earnings were $2.23 per share on net income of $600.7 million.
“In 2007 we are targeting increased results as we benefit from greater access to high-margin global coal markets, along with higher realised US prices from sales contracts signed in recent years,” Peabody chief Gregory H Boyce said.
“The international coal markets are very strong, and we expect US markets to strengthen in 2007 with the announced industry production cutbacks and a return to normal electricity generation. In the near term, we are managing our US production and capital to match demand."
During 2006 Peabody made coal sales of 248Mt and average revenues per ton improved more than 7% in the US and more than 6% in Australia.
Key initiatives for this year will include maximising production at new mine developments in Australia. Operations acquired in the Excel transaction are projected to add 15Mt of production in 2007 and up to 20Mt in 2008.
Peabody's 2007 Australia production includes more than 11Mt of high-demand thermal export coal. Peabody is also expanding its international presence with increased trading activities in Australia, China and Europe.
On the state of future markets, Peabody remained extremely positive.
“China may become a net importer as early as the second half of 2007. Europe is taking steps to reinvest in coal. And the United States is pursuing significant initiatives to increase its long-term use of clean coal technologies for electricity generation and coal conversion applications," Boyce said.
Peabody said coal-to-gas and coal-to-liquids plants represent a significant avenue for long-term industry growth.
China and India are developing CTG and CTL facilities. And coal-to-liquids technologies are receiving growing bipartisan US support, as demonstrated by newly introduced CTL bills such as the Coal-to-Liquid Fuel Promotion Act by US senators Obama and Bunning.
Peabody is expecting 2007 earnings per share of $2.10–2.75 and EBITDA of $1.2 billion to $1.45 billion.
The company said quarterly and annual performance will be sensitive to transportation in the United States and Australia, the ramp-up of operations from Excel, and the timing of metallurgical coal shipments.
Targeted realised prices include an estimated 20% in higher Western US revenues per ton, led by a 30% increase in premium Powder River Basin products, related to the benefit of contracts signed in recent years.