Walter Energy Inc.’s (WLT) first quarter 2010 earnings of 79 cents per share were below the Zacks Consensus Estimate of 92 cents and the year-ago profit of $1.36, primarily due to increased costs.
Net sales and revenues in the quarter increased 10.2% to $312 million, compared with the year-ago levels. Revenue improvements in the quarter are attributed to higher metallurgical coke and coking coal sales volumes, partially offset by lower realized coking coal selling prices. Operating income totaled $71.3 million, down from the last year’s $101.5 million, mostly due to lower coking coal pricing as well as higher production costs.
Total coking coal production and sales volumes in the quarter were 1.8 million tons, up slightly from the year-ago period. Average coking coal prices in the quarter were $127.05 per short ton (down 4.6%) of FOB Port. Total coking coal production in the quarter was 1.7 million tons compared with 1.9 million tons in the prior-year. Natural gas sales totaled 1.4 billion cubic feet, a decrease of 17.6% from the prior year, at an average price of $5.49 (down 9.3%) per thousand cubic feet in the current quarter.
Average mine production costs in the quarter were $58.19 per ton, $6.41 higher than in the prior-year period. Production costs were higher from the prior-year period, primarily as a result of lower production volumes.
Steam and industrial coal sales were 375 thousand tons (up 14%) and production totaled 345 thousand tons (up 17.3%) during the quarter, given better coal blending opportunities and inventory availability. Walter Coke sold 139,081 tons (up 207%) of metallurgical coke in the current quarter at an average price of $327.37 per ton (up 6.2%).
The company’s liquidity as of March 31, 2010, was strong at $452.6 million, with cash of $214.4 million and credit facility of $238.2 million. Capital expenditures were $14.3 million in the quarter compared with $35.1 million last year.
For the second quarter of 2010, Walter Energy expects coking coal production between 1.7 and 1.9 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 and industrial coal sales are estimated at 350,000 – 385,000 tons and coke sales at 95,000 – 97,000 tons.
Coal sales at Walter Minerals for the second quarter are expected to be in line with the recent periods. However, operating income is projected to be lower due to equipment maintenance costs planned in the second quarter, impacting the operating income margin by approximately $10 per ton. Operating income is expected to return to normal levels in the third quarter.
Furthermore, the company retained its guidance to sell about 8 million tons of coking coal in 2010.
Walter Energy anticipates capital expenditures to be approximately $115 million, including maintenance capital of approximately $80 million for full-year 2010.
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