Coal producer Alpha Natural Resources ANR reported a loss of 79 cents per share for the first quarter of 2015, wider than the Zacks Consensus Estimate of a loss of 76 cents. In the year-ago quarter, the company had generated earnings of 7 cents per share.
GAAP earnings during the quarter were 30 cents per share as against a loss of 25 cents per share incurred in the year-ago quarter. The difference between the GAAP and operating numbers in the reporting quarter was primarily due to a one-time gain of $364 million from early extinguishment of debt.
Total Revenue
Alpha Natural Resources’ total revenues of $842 million in the first quarter missed the Zacks Consensus Estimate of $881 million by 4.4%. First quarter total revenues were also lower than the year-ago figure of $1,111.8 million by 24.3%.
The decline in revenues was due to lower contribution from all reporting segments.
Highlights of the Release
Coal tons sold in the first quarter of 2015 decreased 8.9% to 19.5 million tons. The company also witnessed a 16.3% year-over-year decline in the average realized price per ton sold to $37.23. The combination of these two factors impacted the top line of the company.
Total costs and expenses in the first quarter 2015 were $1.05 billion, down 19.1% from $1.30 billion in the first quarter 2014.
Financial Update
Cash and cash equivalents as of Mar 31, 2015, were $0.48 billion compared with $0.74 billion as of Dec 31, 2014.
Long-term debt as of Mar 31, 2015, was $3.14 billion, down from $3.7 billion as of Dec 31, 2014.
Net cash used in operating activities in the first quarter 2015 was $59.8 million compared with $53.9 million used in the first quarter 2014.
Capital expenditure in the first quarter 2015 was $29.6 million compared with $39.7 million in the year-ago period.
Guidance
The company expects to ship 69 to 80 million tons of coal in 2015, which will include 14 to 17 million tons of Eastern metallurgical coal, 19 to 23 million tons of Eastern steam coal, and 36 to 40 million tons of Western steam coal out of the PRB.
Selling, general and administrative expenses are expected to range from $95 million to $115 million for 2015. Interest expense and depreciation, depletion and amortization expense are anticipated in the range of $290 million to $310 million and $650 million to $750 million, respectively.
Capital expenditure for 2015 is expected to be in a range of $200 million to $250 million.
Other Company Release
CONSOL Energy Inc. CNX reported pro forma earnings of 37 cents per share for the first quarter of 2015, beating the Zacks Consensus Estimate of 11 cents by 236.4%.
Arch Coal Inc. ACI reported first-quarter 2015 adjusted loss of 54 cents per share, wider than the Zacks Consensus Estimate of a loss of 48 cents.
Peabody Energy BTU reported a loss of 62 cents per share in first-quarter 2015, much wider than the Zacks Consensus Estimate of a loss of 33 cents, resulting in a negative surprise of 87.9%.
Our View
Alpha Natural Resources was affected by the softness in coal demand and the decline in realized prices per ton made matters worse. The global coal market is not going to improve any time soon, with steel demand showing signs of a decline in the last six months, a headwind for Alpha Natural Resources’ met coal prospects.
To cope with the challenging coal market conditions, the company has decided to idle a few mines in its West Virginia operations. It also has plans to cut expenses with an annual savings target of $60–75 million.
The next few months will give us a clearer picture about whether the steps taken by the company will be enough to overcome the global coal market weakness.
Alpha Natural Resources currently has a Zacks Rank #2 (Buy).
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