Disappointing 1Q for Patriot Coal

Zacks

Patriot Coal Corporation (:PCX) reported a loss of 82 cents per share for the first quarter of 2012 compared with a loss of 17 cents per share in the year-ago quarter.

The loss during the quarter was mainly due to a decline in tons sold owing to lower coal demand, and higher impairment and restructuring expenses. The loss was significantly wider than the Zacks Consensus Estimate of a loss of 38 cents.

Top Line Scenario

Patriot Coal’s revenue for first quarter 2012 was $502.6 million compared with $577 million in the prior-year quarter.The decline in sales was due to a decline in tons sold; partially offset by higher per-ton revenue. The quarterly revenue missed the Zacks Consensus Estimate of $554 million.

Of the first quarter revenue, around $389.2 million came from Appalachia Mining Operations, $95.2 million from Illinois Basin Mining Operations and $18.2 million from Other Appalachia Operations, representing contributions of 77.4%, 19% and 3.6%, respectively.

Operating Highlights

In the reported quarter, volumes sold by Patriot Coal totaled 6.3 million tons versus 8 million tons in first quarter 2011. It includes 4.9 million tons of thermal and 1.4 million tons of metallurgical (“met”) coal. On a segmental basis, Appalachia Mining Operations contributed 4.4 million tons to total company sales while Illinois Basin Mining Operations contributed 1.9 million tons.

Revenue per ton in first quarter 2012 rose 8% to $77.37 from $71.64 in the year-ago quarter. Revenues from Appalachia Mining Operations escalated 11.5% to $89.18 per ton and Illinois Basin revenue increased 18.5% to $50.19 per ton.

Operating cost per ton rose to $64.65 in the reported quarter from $59.12 in the year-ago period.

Earnings before interest, tax, depreciation and amortization (“EBITDA”) in the reported quarter was $36.2 million versus $48.6 million in first quarter 2011, driven by higher average selling prices and offset by higher per-ton costs.

Interest expenses were $16.2 million in first quarter 2012 versus $22.9 million in the year-ago quarter.

Financial Performance

Cash and cash equivalents as of March 31, 2012 were $115 million compared with $194.2 million as of December 31, 2011.

As of March 31, 2012, long-term debt was $442.3 million versus $441.1 million as of December 31, 2011.

In the first quarter of 2012, cash used in operating activities was $41 million compared with $30 million in the prior-year quarter.

In first quarter of 2012, company’s capital expenditure was $30 million versus $28.7 million in the year-ago quarter.

Guidance

Patriot Coal forecasts fiscal 2012 sales in the range of 25 – 27 million tons, including met coal sales of 7 – 7.4 million tons. In 2012, cost per ton of coal from the Appalachia segment is expected to be in the range of $72 – $78, while cost per ton of coal from the Illinois Basin is likely to be in the $42 – $46 range. The company sold more than 1 million tons of met coal, to be delivered in 2012.

Zacks Rank

Patriot Coal Corporation currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

St. Louis, Missouri-based Patriot Coal Corporation is a coal producer and marketer in eastern United States, operating 13 mining complexes in Appalachia and the Illinois Basin. It controls approximately 1.9 billion tons of proven and probable coal reserves. The company primarily competes with James River Coal Co. (JRCC).

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