Peabody Energy’s Australian coal operations’ performance in 3Q14
Peabody Energy: Coal producer's 3Q14 performance and outlook (Part 4 of 11)
Australian operations
Peabody Energy Corporation’s (BTU) Australian operations produce both thermal and met coal, which is used in steelmaking. Peabody operates three mines in New South Wales and seven mines in Queensland, Australia. The company also operates a coal-trading platform under the company Peabody Coal Trade.
Unlike U.S. operations that cater primarily to domestic utilities, Peabody’s Australian operations are focused on the seaborne market. The company supplies met coal to steel producers in Japan, Europe, Taiwan, India (EPI), Korea, and South America, as well as thermal coal to utilities in Asia and Australia.
Shipments on the rise
Australian operations sold 10 million tons of coal in 3Q 2014 compared to 9 million tons in 3Q 2013. On a year-to-date basis—referring to the first nine months of the year—Australian operations sold 27.9 million tons of coal, compared to 25.9 million tons sold during the same period in 2013.
Met coal sales came in at 4.6 million tons in 3Q 2014 compared to 4.0 million tons in 3Q 2013. On a year-to-date basis, the company sold 12.6 million tons of met coal, compared to 11.7 million tons sold during the same period in 2013. Thermal coal sales came in at 5.4 million tons in 3Q 2014—3.4 million tons of which were seaborne.
Revenue per ton falls
Though shipments from Australia rose by 11%, revenues per ton dropped by 13%, to $67.38 in 3Q 2014 from $77.85 in 3Q 2013. This was primarily due to lower pricing for seaborne met and thermal coal. The benchmark price for met coal has dropped to $119, a multi-year low. Similarly, Australian thermal coal prices are also in decline due to slowing demand from China and oversupply in the industry.
While Peabody is in a better position than other U.S. met coal producers, including Walter Energy, Inc. (WLT), Arch Coal Inc (ACI), and Alpha Natural Resources, Inc. (ANR), the overall industry scenario doesn’t look favorable.
Revenues from Australian operations down
While volumes were up 11%, the 13% drop in revenue per ton led to a 4.1% drop in revenues from Australian operations. Revenues were down to $676.3 million in 3Q 2014 from $705.3 million in 3Q 2013.
Like the U.S. operations, Peabody Energy’s Australian operations also face challenges. We’ll look at these, next.
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