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Arch Coal Inc. Message Board

  • go4invest go4invest Jul 30, 2013 9:10 AM Flag

    Market report -- In Play (ACI)

    Part I

    Arch Coal beats by $0.04, misses on revs; Co says that the the outlook for U.S. thermal coal is improving Reports Q2 (Jun) loss of $0.29 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus Estimate of ($0.33); revenues fell 20.6% year/year to $766.3 mln vs the $919.73 mln consensus.

    Co's revenue represented a decline versus the prior-year quarter and reflective of overall weakness in the metallurgical coal markets compared with the year-ago period.

    Arch believes currently depressed metallurgical coal market trends are unsustainable over the long term. Global crude steel production is forecasted to increase 35% between 2012 and 2020, reaching 2 billion tonnes by the end of the decade. Increased utilization at existing steel plants and the projected build-out of new steel capacity will drive future metallurgical coal demand. Moreover, capital spending for future metallurgical coal supply projects is being curtailed and supply rationalization at existing metallurgical coal operations is underway. "Even with a near-term cautious outlook on global metallurgical coal markets, we're confident that supply will decline and demand will rebound over time," said Eaves. "Metallurgical coal output and capital spending levels industrywide are in the process of significant rationalization, setting the stage for the next market upswing as global economies begin to improve."

    Sentiment: Hold

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    • Part II

      The outlook for U.S. thermal coal is improving. Year-to-date through May 2013, domestic coal use for power generation has increased 10% compared with the same period last year. For 2013, Arch expects thermal coal consumption in the U.S. to rise by 50 mln tons versus 2012 levels. Moreover, according to Mine Safety and Health Administration data, U.S. coal production has declined more than 20 mln tons year-to-date through June 2013. Increased demand and decreased supply are reducing coal stockpiles at U.S. power generators. Internal estimates suggest that customer coal stockpile levels declined to roughly 170 mln tons at the end of June 2013, representing a 15 mln ton reduction since the beginning of the year.

      Company Outlook
      Arch currently expects thermal sales volumes, including volumes from Canyon Fuel, to be in the range of 130 mln to 137 mln tons for 2013. The co has lowered its metallurgical sales forecast, and now expects to ship between 7.7 mln and 8.3 mln tons into metallurgical coal markets during 2013.

      For full year 2013, Arch also has reduced its annual cash cost per ton guidance range in each of the company's operating regions. In addition, Arch has further reduced its forecasted capital expenditures by approximately $20 mln for the full year, and now expects to spend between $280 mln and $310 mln for 2013

      Sentiment: Hold