Walter Energy Inc.’s (WLT) fourth-quarter earnings of 54 cents per share was below the Zacks Consensus Estimate of 59 cents and the year-ago profit of $4.37 due to lower revenues and operating income. For the full year 2009, the company reported earnings of $2.55 per share, way below the Zacks Consensus Estimate of $2.63 and the last year’s earnings of $6.35.
 
Net sales and revenues for the quarter declined 35% to $236.3 million, compared to year-ago levels. Operating income totaled $36.9 million, down from last year’s $91.1 million. Both net sales and revenues and operating income were negatively impacted by lower coke and metallurgical coke pricing and sales volumes. Of the revenue decline, 43% and 44% are attributed to lower coking coal prices and volumes, respectively.
 
In 2009, net sales and revenues were $966.8 million, down 16%, of which 52% is due to lower metallurgical coal pricing and volumes, while the remaining is due to lower coking coal prices and volumes. Operating income for the year declined 41% to $202.2 million, driven by lower coking coal, metallurgical coke and natural gas pricing and lower metallurgical coke volumes.
 
Total coking coal production and sales volumes in the quarter were 1.4 million tons, down from 1.8 million tons and 1.7 million tons, respectively, in the year ago period. Average coking coal prices in the quarter were $126.48 per short ton (down 24%) of FOB Port. Natural gas sales totaled 1.4 billion cubic feet of gas, down 22% from the prior year, at an average price of $4.09 (down 48%) per thousand cubic feet in the current quarter.
 
Steam and industrial coal sales were 326 thousand tons (down 10%) and production totaled 300 thousand tons (down 14%) during the quarter, reflecting lower demand in the 2009 period. Walter Coke sold 88,317 tons (down 10%) of metallurgical coke in the current quarter at an average price of $312.11 per ton (down 20%).
 
The company’s liquidity at year-end was strong at $401.6 million, with cash of $165.3 million and credit facility of $236.3 million. Net debt outstanding was $11.2 million as of December 31, 2009. Capital expenditures were $29.0 million in the quarter, totaling $96.3 million for the year.
 
For the first quarter of 2010, Walter Energy expects coking coal production to be between 1.7 and 1.8 million tons, with production costs expected to average between $55 and $60 per ton. Coking coke sales are expected to range between 1.7 and 1.9 million tons. Steam & industrial coal sales are expected to be 315,000 – 350,000 tons and coke sales at 125,000 – 135,000 tons.
 
Furthermore, the company expects to sell about 8 million tons of coking coal in 2010. Looking forward, the company expects Walter Coke to return to full capacity by the end of the first quarter, with full-year 2010 sales totaling 380,000 – 400,000 tons. Walter Minerals is expected to produce and sell 1.3 – 1.4 million tons of steam and industrial coal in 2010.
 
Walter Energy expects capital expenditures to be approximately $110 million, including maintenance capital of approximately $80 million, for full-year 2010.
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