Arch Coal’s 2Q earnings rise on stronger global markets and 40 percent sales jump

Arch Coal 2Q profit surges on global sales

ST. LOUIS — Arch Coal Inc. said Friday it reversed losses from a year ago during the second quarter, handily beating Wall Street’s expectations on the strength of global markets and a nearly 40 percent jump in sales.

The St. Louis miner, one of the world’s biggest coal producers, said it expected an even stronger showing for the remainder of the year, and raised the lower end of its adjusted annual earnings guidance by a dime, excluding non-cash charges.

“Coal markets have improved considerably since this time last year but remain well below the levels of the bull market of 2008,” said Steven Leer, Arch’s chairman and chief executive.

Leer said global markets for higher-margin metallurgical coal — the kind used in making steel — remain tight while conditions for thermal coal that fuels power plants “have strengthened meaningfully,” with those utilities — notably those served by Arch’s western U.S. operations — drawing down their stockpiles.

Arch fuels about 8 percent of all U.S. electrical generation.

“Looking ahead, we expect to continue managing through any ongoing operational challenges and deliver even stronger results in the year’s second half,” Leer said.

Leer said during a conference call that Arch is upbeat about coal’s prospects at least in the near term, citing favorable weather patterns — chiefly lingering summer heat that could drive up use of air conditioners — and an improving U.S. economy and growth of the global appetite for coal.

“We have positioned Arch to capitalize well on such trends,” Leer said.

Arch said it now expects adjusted earnings for the year of $1.10 — up from its $1 forecast in April — to $1.40 per share, excluding non-cash charges. In January, the company said it expected 50 cents to $1 per share.

Arch shares rose $1.24, or 5.5 percent, to $23.74 in afternoon trading.

Arch posted net income of $66.2 million, or 41 cents per share, during the April-through-June period. A year ago, Arch lost $15.1 million, or 11 cents per share, on the weight of a 20 percent drop in sales, production cutbacks and weak prices for competing natural gas.

Revenue rose to $764.3 million versus $554.6 million a year ago.

Analysts polled by Thomson Reuters expected, on average, 25 cents per share on revenue of $765.4 million.

Arch said the average sales price of coal per ton was 6 percent higher than a year ago, though operating costs inched up 2 percent per ton. Arch said it averaged $18.86 for each of the 38.1 million tons of coal it sold in the second quarter, better production than the 27.4 million last year when black ore fetched $19.43 a ton.

Arch left its production outlook for the year unchanged, still expecting 147 million to 155 million tons, excluding coal bought from third parties.

Over the first half of this year, Arch said it has earned $64.5 million, or 40 cents per share, on $1.48 billion in revenue, up from $15.4 million, or 11 cents per share, on $1.24 billion in sales during the same time a year ago.