U.S. based coal producer Arch Coal Inc. (ACI) released preliminary earnings results for the third quarter of 2014. Arch Coal is scheduled to release its earnings before the market opens on Oct 28, 2014 and its preliminary results indicate a sequential improvement in performance.
Arch Coal expects third quarter adjusted earnings before interest, taxes, depreciation, depletion and amortization (adjusted EBITDA) in a $70 million to $74 million range, higher than $64.9 million recorded in the sequentially preceding quarter.
The company exited the third quarter on a sounder financial condition when compared with the second quarter of 2014. Arch Coal’s cash and short-term investment as of Sep 30, 2014 was $1.05 billion, increasing nearly $60 million from the preceding quarter. The total available liquidity of the company at the end of the third quarter was $1.3 billion as against $1.25 billion at the end of the second quarter.
On the second quarter earnings release, Arch Coal lowered its full year met and thermal coal sales guidance due to the softness in met coal demand and congestion in railroad services. The company expects met coal and thermal coal sales for 2014 to be between 6.3–6.9 million tons and 124–130 million tons respectively.
It will be interesting to see whether the company will be able to retain its sales guidance for 2014 as earlier this month China reintroduced tariffs on coal imports to safeguard the interest of domestic coal producers. China imposed a 6% tariff on thermal coal imports and a 3 % tariff on coking coal.
China being a large export market for both types of coal, we expect it to definitely impact the seaborne coal market prospects of producers like Peabody Energy Corporation (BTU), Walter Energy Inc. (WLT), Alpha Natural Resources Inc. (ANR) and Arch Coal among others.
Arch Coal currently has a Zacks Rank #4 (Sell).
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