Peabody Energy Corporation (BTU: 42.92 -0.14 -0.33%) has reported second-quarter 2010 earnings of 69 cents per share, beating the Zacks Consensus Estimate of 64 cents and the year-ago profit of 50 cents. The better-than-expected results were due to improved pricing, coupled with higher volumes at both the U.S. and Australian mining operations.
Revenue
Peabody’s quarterly revenue, at $1.66 billion, increased 23.8% year-over-year on the back of a 49% rise in Australian revenues per ton. The company’s U.S. operations also performed fairly well, with revenues almost in line with last year. However, revenues were marginally pulled back by lower volumes in the company’s Midwest U.S. mining operations.
Volumes
The company’s total sales volumes in the quarter were 59.7 million tons, slightly ahead of prior year levels, primarily due to improved shipments in Australia. By region, sales volumes were 39.8 million tons (up 3% year over year) from Western U.S. mining operations, 6.4 million tons (up 28%) from Australian operations and 7.3 million tons (down 12%) from Midwestern U.S. mining operations.
Balance Sheet
Peabody’s capital expenditure (excluding acquisitions) in the second quarter was $117.4 million. At the end of the quarter, the company had $1.2 billion in cash and $2.7 billion in long-term debt. Operating cash flows at quarter-end were $292.4 million.
Guidance
Peabody expects its third quarter 2010 EBITDA at $475 – $550 million and adjusted earnings per share in the 75 cents – $1.00 range. For full year-2010, the company has raised the lower-end of its expected EBITDA target to $1.7 – $1.9 billion with adjusted earnings of $2.60 – $3.15 per share. Higher metallurgical and seaborne thermal coal prices are anticipated to benefit Peabody in the second half of 2010.
For 2010, the company is targeting total sales of 240 – 260 million tons, including trading and brokerage volumes. Australian sales are expected to be 27 – 29 million tons, while U.S. volumes are expected to be 185 – 195 million tons.
Outlook
The company’s growth going forward is expected to be driven by continued strength in the U.S. and Australia (Pacific markets), led by demand for metallurgical coal for steelmaking in China and India. Other Asian nations such as, Japan are also expected to continue to rebound sharply from 2009 levels. The company estimates Japanese steel production to increase over 20% in 2010, while thermal coal demand is already above 2009 levels.
Peabody has significant leverage to the improving prices for seaborne metallurgical and thermal coal. The company has 2.5 million tons of metallurgical coal unpriced for the fourth quarter of 2010, and 9 to 10 million tons available for pricing in 2011.Revenue
Peabody’s quarterly revenue, at $1.66 billion, increased 23.8% year-over-year on the back of a 49% rise in Australian revenues per ton. The company’s U.S. operations also performed fairly well, with revenues almost in line with last year. However, revenues were marginally pulled back by lower volumes in the company’s Midwest U.S. mining operations.
Volumes
The company’s total sales volumes in the quarter were 59.7 million tons, slightly ahead of prior year levels, primarily due to improved shipments in Australia. By region, sales volumes were 39.8 million tons (up 3% year over year) from Western U.S. mining operations, 6.4 million tons (up 28%) from Australian operations and 7.3 million tons (down 12%) from Midwestern U.S. mining operations.
Balance Sheet
Peabody’s capital expenditure (excluding acquisitions) in the second quarter was $117.4 million. At the end of the quarter, the company had $1.2 billion in cash and $2.7 billion in long-term debt. Operating cash flows at quarter-end were $292.4 million.
Guidance
Peabody expects its third quarter 2010 EBITDA at $475 – $550 million and adjusted earnings per share in the 75 cents – $1.00 range. For full year-2010, the company has raised the lower-end of its expected EBITDA target to $1.7 – $1.9 billion with adjusted earnings of $2.60 – $3.15 per share. Higher metallurgical and seaborne thermal coal prices are anticipated to benefit Peabody in the second half of 2010.
For 2010, the company is targeting total sales of 240 – 260 million tons, including trading and brokerage volumes. Australian sales are expected to be 27 – 29 million tons, while U.S. volumes are expected to be 185 – 195 million tons.
Outlook
The company’s growth going forward is expected to be driven by continued strength in the U.S. and Australia (Pacific markets), led by demand for metallurgical coal for steelmaking in China and India. Other Asian nations such as, Japan are also expected to continue to rebound sharply from 2009 levels. The company estimates Japanese steel production to increase over 20% in 2010, while thermal coal demand is already above 2009 levels.
Peabody has roughly 1 million tons of Australian thermal coal exports unpriced for the fourth quarter of 2010, and 9 – 10 million tons unpriced for 2011. In the U.S., Peabody has 10% – 15% of its planned 2011 production available for pricing, with nearly one-third already committed. The company also has 50% - 55% of its 2012 production available for pricing.
Furthermore, Peabody continues to advance its development of metallurgical and thermal coal projects with the goal of raising its Australian production platform to 35 to 40 million tons per year by 2014.
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