Smaller Loss for Alpha Natural Resources (ANR, BTU, ACI)


Alpha Natural Resources Inc. (NYSE: ANR) reported third-quarter 2012 earnings this morning. The coal mining company posted a net loss of $0.16 per share on revenues of $1.46 billion. In the same period a year ago, the company reported adjusted earnings per share (EPS) of $0.34 on revenues of $2 billion. First-quarter results compare to the Thomson Reuters consensus estimates for a net loss of $0.45 per share and $1.68 billion in revenues.

Alpha maintained its shipment volume guidance for the full year. All the company's thermal coal production for the rest of this year is committed at an average price of $66.02 per ton for western coal and $12.89 per ton for eastern coal. The company did not offer EPS guidance. The consensus estimates for the fourth quarter call for a net loss of $0.53 per share on revenue of $1.65 billion. For the full year, the consensus estimate calls for a net loss of $1.58 per share on revenues of $7.08 billion.

On a GAAP basis, the company posted a per-share loss of $0.21.

The company's CEO said:

Market conditions for both metallurgical and thermal coal have been challenging throughout much of 2012, and continued in the third quarter. In the face of these market headwinds, Alpha has taken swift and decisive actions to right-size our operational footprint and our cost structure.

The company announced in September that it will cut production by 16 million tons annually, including a 50% cut in its Powder River Basin operations and an additional 40% cut in its Appalachian production. Both regions produce lower-priced thermal coal. Alpha will also cut back on its metallurgical coal production. About 1,200 workers will lose their jobs as a result of the cut.

The year-over-year decline in revenue "was driven primarily by lower metallurgical coal revenues due to a 23% decline in average per ton realizations and an 18% decline in average per ton realizations." The company also shipped 23% less thermal coal from its Appalachian mines.

Where competitors Peabody Energy Corp. (NYSE: BTU) and Arch Coal Inc. (NYSE: ACI) both posted positive (and surprisingly large) EPS gains, Alpha's reliance on domestic shipments of cheaper thermal coal simply weighs too heavily on revenues and profits. Alpha's actual net loss was half what analysts expected, and that is probably the story investors will act on today.

Alpha's shares are trading down up about 5.8% in premarket trading, at $9.38 in a 52-week range of $5.28 to $29.29. The consensus target price for the shares was around $10.30 before today's report.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Commodities & Metals, Earnings Tagged: ACI, ANR, BTU