Peabody Energy Corporation (BTU) reported fourth-quarter and full-year 2009 earnings of 43 cents and $1.92 per share, respectively, beating the Zacks Consensus Estimate of 30 cents and $1.78. However, the quarterly and yearly results were down 53% and 43% from the respective year-ago earnings of 91 cents and $3.36 per share.
Peabody’s revenues declined to $1.55 billion in the quarter from $1.89 billion a year ago. The company’s revenue for 2009 declined 8% to $6.01 billion from $6.56 billion in 2008, led by an 11% rise in U.S. revenues per ton. The company’s second half 2009 revenues rose $430 million over the first half, led by increased metallurgical coal sales to China and other Asian nations.
The company’s total sales volumes in the quarter were 61.2 million tons, down from 69.3 million tons a year ago. For the full year, Peabody sold 243.6 million tons compared to 255.0 million tons in 2008, driven by planned Powder River Basin (PRB) reductions offset by higher Midwestern volumes and the full operation of the low-cost El Segundo Mine in the Southwest.
Australian volumes totaled 22.3 million tons for the year, including 6.9 million tons of metallurgical coal and 9.6 million tons of seaborne thermal shipments. Australian coal volumes in the second half 2009 increased 37% over the first half, driven by growing customer demand.
Peabody’s expenses during the quarter continued to decline with its cost containment programs showing results. Along with reducing costs the management is keen on exercising tight capital discipline and reducing inventories. The company’s balance sheet was further strengthened by a record $1.04 billion in operating cash flows at year end, leading to cash of approximately $989 million.
Peabody expects its first quarter 2010 EBITDA to be in line with the fourth quarter of 2009. For 2010, the company is targeting total sales of 240 to 260 million tons, including trading and brokerage volumes.
Australian sales are expected to increase to 26 to 28 million tons, including 7.5 to 8.5 million tons of metallurgical coal and 12.5 to 13.0 million tons of thermal exports, while U.S. volumes are expected to be 185 to 195 million tons. Higher expected seaborne metallurgical and thermal coal prices are anticipated to benefit Peabody’s results beginning in the second quarter.
The company continues to exercise tight capital discipline and is targeting 2010 capital expenditure in the range of $600 – $650 million, which includes investments in the large Bear Run Mine in the Midwestern United States and Australian projects serving the growth markets in Asia.
In Australia, Peabody is advancing projects that would approximately double 2009’s export volumes by 2014. Furthermore, the company’s targeted 2014 capacity includes 12 to 15 million tons per year of seaborne metallurgical coal and 15 to 17 million tons per year of export thermal coal. Peabody believes it has the necessary logistics capacity to deliver the higher volumes, based on previous acquisitions and port investments.
The company’s growth going forward is expected to be driven by continued strength in United States and Australia (Pacific markets), led by China’s and India’s demand for metallurgical coal for steelmaking. The seaborne Pacific coal markets are expected to increase 8% in 2010. Moreover, global steel production is expected to increase 9% in 2010, with continued growth from China and India and increased output from traditional steel-producing nations.
Peabody has significant leverage to the improving prices for seaborne metallurgical and thermal coal. The company has 4.5 to 5.5 million tons of Australia metallurgical coal unpriced for 2010, and 9 to 10 million tons unpriced for 2011. Peabody has 6.5 to 7.0 million tons of Australia thermal coal exports still unpriced for 2010, and 9 to 10 million tons unpriced for 2011.
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