Foundation takeover cements Alpha's performance

INCREASED shipments, cost-cutting and the acquisition of Foundation Coal all played a role in a significant jump in profit for Alpha Natural Resources.
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Courtesy Alpha Natural Resources.

Donna Schmidt

For the December quarter, the company reported a net income of $US18 million – a 221% spike over last year’s $5.6 million. Total revenues were $893.3 million, or 53% higher than what stand-alone Alpha reported in the final quarter of 2008, before its takeover of rival Foundation.

Coal revenues jumped from $512.8 million stand-alone in the fourth quarter 2008 to $787.5 million in 2009. The higher numbers were due to the inclusion of $393.8 million from the former Foundation operations, which offset Alpha’s sagging shipment levels and resulting revenues as it worked to balance supply and demand.

Alpha shipped 12.1 million tons from the Powder River Basin, its top production performer in the December quarter. Its eastern US steam coal mines shipped 6.6Mt, while metallurgical properties in the eastern coalfields shipped 2.6Mt.

Per-ton prices were a mixed bag for the combined company; PRB prices rose from the third quarter from $10.39 to $10.52 while steam coal from Alpha’s eastern mines was down from $64.43 to $62.57. Average realization for eastern US met product was up just slightly from $96.94/t in the previous quarter to $97.18/t.

"Alpha again delivered solid operating results in the fourth quarter of 2009, and our performance would have been even better had we not experienced severe winter weather in December that temporarily interrupted production and shipments at many of our operations," Alpha chief executive officer Kevin Crutchfield said.

"More than six months have passed since we completed our merger with Foundation Coal, and the integrated company has consistently delivered strong operating and financial results.”

Crutchfield outlined that 2010 was on the way to being bright for the operator, as met coal demand was up, customer discussions were ongoing and strength indicators had shown the momentum would likely continue.

"In response to this increasing demand, we are raising our guidance for metallurgical coal shipments in 2010 to a new range of 11-13 million tons,” he said, noting that 38% of planned 2010 metallurgical coal shipments were still unpriced.

“Combined with our expertise in blending and optimization and our ample port capacity, including 41 per cent ownership of the DTA terminal, we are well positioned to benefit from the current momentum in the global metallurgical coal market.”

Just after the acquisition of Foundation last July, Alpha announced a collection of synergies, and Crutchfield said those plans were still on track. Many of those included blending and optimization, particularly for met product and export shipment tonnage.

“In light of increasing global demand for metallurgical coal, these marketing synergies have the potential to exceed our initial estimates in 2010. Going forward, we are intensely focused on delivering the consistent execution made possible by Alpha's post-merger base of operations, which is arguably the most diverse of any domestic coal producer," Crutchfield said.