Peabody Energy Corporation BTU, a leading coal mining company, has announced that its second quarter 2015 adjusted EBITDA and adjusted EPS were adversely impacted by weather-related shipment issues in the Southern Powder River Basin and lower seaborne coal pricing.
Peabody during its first quarter release had guided that second-quarter 2015 adjusted EBITDA will be in the range of $135 million to $175 million while it will incur a loss per share of 59 cents to 49 cents. However, the company now expects adjusted EBITDA to be lower by nearly $60 million due to a decline in production in the Southern Powder River Basin in the month of June due to harsh weather conditions. This was aggravated by lower pricing on Australian metallurgical coal.
During the second quarter, the company decided to curtail production in the North Goonyella Mine in Queensland, Australia and to reduce nearly 250 corporate and regional positions to create a leaner organization. Peabody expects to incur a charge in the range of $20 million to $25 million due to these activities, which were not included in the loss per share guidance.
This is undoubtedly a difficult period for this coal manufacturer which is smarting from lackadaisical demand and weak pricing. As a result, management was compelled to idle mines and cut jobs in order to reduce operating costs.
The widespread softness is also reflected in its share prices. Peabody Energy’s shares have continued to fall since it reported a wider-than-expected first quarter loss. Since then, Peabody’s shares have lost nearly 51.3% year to date.
In this context, the recent ruling from the U.S. Supreme Court questioning the U.S. Environmental Protection Agency’s (EPA) regulations on lowering emissions in the power sector might provide a much needed, though temporary breather, to coal companies like Peabody Energy, Arch Coal ACI and CONSOL Energy CNX. Thermal coal supplied by these companies to the electric utilities is a major source of fuel.
Peabody Energy currently has a Zacks Rank #4 (Sell). A better-ranked stock in the same space is Rhino Resources RNO, carrying a Zacks Rank #2 (Buy).
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