ANR Incurs Loss as Coal Price Falls - Analyst Blog

By Zacks | February 14, 2013 AAA

Coal producer Alpha Natural Resources (ANR) reported a loss of 19 cents per share for the fourth quarter of 2012, much narrower than the Zacks Consensus Estimate of a loss of 53 cents. The loss per share in the quarter was however wider than the year-ago loss of 9 cents.

GAAP loss during the quarter was 58 cents per share versus a loss of $3.62 per share incurred in the year-ago quarter. The difference between GAAP and operating loss in the reporting quarter was primarily due to impairments and restructuring charges.

The company's 2012 operating loss was 94 cents per share, much narrower than the Zacks Consensus Estimate of a loss of $1.27 per share. However, the performance during 2012 was substantially lower than 2011 earnings of $1.59 per share.

Total Revenue

Alpha Natural Resources' total revenue of $1.56 billion in the fourth quarter was marginally lower than the Zacks Consensus Estimate of $1.58 billion. The results were also lower than the year-ago figure of $2.07 billion by 24.6%.

Alpha Natural Resources' total revenue of $6.97 billion in 2012 was slightly lower than the Zacks Consensus Estimate of $6.98 billion. The results were also lower than the 2011 figure of $7.10 billion by 1.8%.

In 2012, the company registered a 15% increase in Freight and Handling revenues, while the 2.8% dip in Coal revenues and 22.9% decline in Other Revenues resulted in overall decline.

Highlights of the Release

Coal shipment in 2012 increased 2.3% to 108.8 million tons. However this did not have a positive impact on total revenue as the average per-ton realization in 2012 was lower by $2.93 per ton as against 2011.

Total cost and expenses in 2012 were $9.77 billion versus $7.72 billion in the prior year. The increase in expenses was primarily due to higher depreciation, depletion and amortization expenses, which contracted margins.

Financial Update

Cash and cash equivalents of the company as of Dec 31, 2012 were $730.7 million versus $585.9 million as of Dec 31, 2011.

Long-term debt as of Dec 31, 2012 was $3.29 billion versus $2.92 billion as of Dec 31, 2011.

Cash from operating activities during 2012 was $518.4 million versus $686.6 million in the prior year.

Guidance

The company expects to ship 81 to 92 million tons of coal in 2013, which will include 19 to 22 million tons of Eastern metallurgical coal, 25 to 30 million tons of Eastern steam coal, and 37 to 40 million tons of Western steam coal out of the PRB.

Selling, general and administrative expenses are expected to range from $140 million to $160 million for 2013. Interest expense and depreciation, depletion and amortization expense are anticipated to be in the ranges of $230 million to $240 million and $875 million to $975 million, respectively.

Capital expenditure for 2013 is expected to remain in a range of $300 million to $350 million.

Other Company Release

Arch Coal Inc. (ACI) reported fourth-quarter 2012 pro forma loss of 42 cents per share, wider than the Zacks Consensus Estimate of a loss of 14 cents. Peabody Energy Corporation (BTU) reported fourth-quarter 2012 pro forma loss of $1.12 per share, below the Zacks Consensus Estimate of pro forma earnings of 26 cents per share. Natural Resource Partners L.P. (NRP) reported fourth-quarter 2012 earnings of 58 cents per unit, beating the Zacks Consensus Estimate of 43 cents.

Our View

The coal producers in the U.S. are feeling the pressure of softness in coal demand. The abundant supply of natural gas and its rock bottom low prices are not helping matters. The uncertainty prevailing in Europe is also leading to lower demand for coal.

Some signs of improvement in demand for coal from China and the recent natural calamity in Australia disrupting mining operation might act as a tailwind for the company going forward.

However, the 2013 coal shipment expectation of Alpha Natural Resources was much lower than the 2012 level, which suggests that the recovery of global demand for coal will take some time. Alpha Natural Resources has a Zacks Rank #3 (Hold).

Based in Abingdon, Virginia, Alpha Natural Resources Inc was founded in 2002. The company with its subsidiaries engages in the production and selling of steam and metallurgical coal in the United States.  With a market cap of $1.87 billion the company has 13,000 full time employees.

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