Monday, February 7, 2011

Alpha Natural Resources Inc. (NYSE: ANR): Q4 Earnings Preview 2010

Alpha Natural Resources Inc. (NYSE: ANR), the third-largest US coal producer, is scheduled to release its fourth-quarter earnings before the opening bell on Wednesday, February 9, 2011. Analysts, on average, expect the company to report earnings of 24 cents per share on revenue of $970.30 million. In the year ago quarter, the company reported earnings of 51 per share on revenue of $893.29 million.

Alpha Natural Resources, Inc. operates as a coal producer primarily in the central Appalachian and northern Appalachian regions. The Company is a supplier and exporter of metallurgical coal for use in the steel-making process, and a supplier of thermal coal to electric utilities and manufacturing industries.

In the preceding third-quarter, the Abingdon, Virginia-based company's net income was $31.87 million or $0.27 per share, compared to a loss of $16.27 million or $0.16 per share in the same quarter of last year. Excluding amortization of coal supply agreements and merger-related expenses, income from continuing operations was $70.7 million or $0.58 per share, higher than $52.6 million or $0.50 per share in the year-ago quarter. Revenues rose to $1 billion from $729.25 million in the year-ago quarter.  Analysts, on average, expected the company to report earnings of $0.79 per share on revenue of $983.28 million.

The Industrial Metals and Minerals sector has enjoyed strong profits lately due to surging demand for coal. Doubling in some cases, profits are up thanks to voracious coal consumption in emerging markets. Trying to satisfy their growing energy needs, countries like China and India are importing large amounts of coal for electricity production. Chinese coal imports were up 60% in 2010. 

Prices for metallurgical coal have climbed in recent months after flooding of coal mines in Australia. Demand for steel is also on the rise as economic growth picks up steam in the developing world and elsewhere.

Last month, the coal producer lifted its forecast for metallurgical coal shipments in 2011 as it also said the cost of coal sales in the east will be higher than previously expected. The company said the recent flooding in Queensland, Australia has significantly strengthened the market for metallurgical coal and that it now expects 2011 shipments will be in the range of 13 million tons to 14.5 million tons, compared to the previous forecast of 11.5 million tons to 13.5 million tons. However, it also said that the cost of coal sales in the east for 2010 is now expected to be between $60.50 and $61.50 a ton, due to factors including poor rail service, severe weather and delayed export shipments at the ports. Its previous guidance had been for costs to be between $57 and $58.50 a ton.

Recently, Alpha Natural Resources agreed to buy Massey Energy Co. (NYSE: MEE) in a cash-and-stock deal valued at $8.5 billion, less than a year after an explosion at a Massey mine killed 29 workers. Alpha Natural said it will emerge with reserves of 5 billion tons — one of the world’s largest holdings of metallurgical coal, which is used for making steel. The transaction is expected to close in mid-2011, subject to approval by each company’s stockholders as well as regulatory clearances. The combined company would have sales of about 131 million tons annually and control about 29 percent of the U.S. supply of metallurgical coal. Combined, the pair should produce 27 million tons a year of higher-priced metallurgical coal by 2013 and start adding to profits next year “Together we will be America’s largest supplier of metallurgical coal for the world’s steel industry and a highly diversified supplier of thermal coal to electric utilities in the U.S. and overseas,” Alpha Natural CEO Kevin Crutchfield said.

Full Disclosure: None.
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