TORONTO (miningweekly.com) – US coal producer Peabody Energy on Thursday reported disappointing first-quarter earnings as weak coal prices persisted, translating into a wider-than-expected loss.

For the three months ended March 31, St Louis, Missouri-based Peabody more than doubled its loss attributable to shareholders to $48.5-million, or $0.18 a share, from $23.4-million, or $0.09 a share, a year earlier.

The adjusted loss was $0.19 a share, significantly more than the on average $0.01-a-share loss expected by 23 Wall Street analysts. They also expected Peabody to record revenue of $1.68-billion.

However, despite the company and some of its rivals expecting an uptick in the thermal electricity-making coal market, Peabody revealed that it expected a second-quarter adjusted loss of between $0.39 and $0.14 a share. Analysts expected the company’s current-quarter adjusted earnings to come in at $0.20 a share.

First-quarter revenues totalled $1.63-billion, a 7% decline when compared with $1.75-billion in the same period last year, mainly owing to the lower realised pricing that was partly offset by a 7% year-on-year increase in sales volumes to 61.3-million tons.

Peabody’s Australian revenue of $611.8-million was impacted by a 17% decline in revenues per ton, while Australian sales totalled 8.2-million tons, including 3.2-million tons of metallurgical coal and 3.1-million tons of seaborne thermal coal.

US mining revenues increased to $985-million as a 10% rise in Western shipments offset a 7% decline in US revenues per ton.

Peabody said the second-quarter metallurgical coal price benchmark for high-quality low-volatility hard coking coal settled at $120/t, and benchmark low-volatility pulverised coal injection at $100/t. The coking coal benchmark declined $23/t from the first-quarter settlement.

The company also reported that its first-quarter capital investments were the lowest in ten years, with 2014 capital targets having been reduced to between $250-million and $295-million. The budget was mainly allocated to sustaining capital items, with major new projects dependent on market conditions.

RISING THERMAL DEMAND
North American coal miners are dealing with weak prices amid low demand for thermal electricity-making coal and metallurgical steelmaking coal as competition from the emerging shale gas industry impacts on markets.

Despite this, Peabody said it saw a substantial increase in US coal demand and coal power generation was now nearly twice that of natural gas.

“Rising coal utilisation, higher natural gas prices and reduced shipments resulted in the largest stockpile withdraw in 36 years. The cold winter and spikes in natural gas prices again highlight the need for low-cost, reliable, base-load coal plants in the US generation mix,” Peabody chairperson and CEO Gregory Boyce said.

However, even with increased coal demand, continued supply overhang had led to seaborne coal price declines. Near-term stimulus activities in China and limited supply increases were expected to lead to improved market fundamentals later this year and into 2015.

“Longer-term global urbanisation trends will drive continued coal demand growth, while seaborne coal supplies are likely to be constrained by deferred investments and [the] removal of production at the high end of the cost curve,” Boyce said.

Peabody’s optimism is shared by the US Energy Information Administration, which on Thursday said it too expected power plant coal stockpiles to rebuild after a heavy winter drawdown.

Analyst Tyson Brown on Thursday said stockpiles at electric power plants fell 24% between November and February, from 156-million tons to 119-million tons, ending at the lowest level since March 2006.

“A main reason for this reduction was increased electricity demand because of the colder-than-normal weather. Total US net electricity generation was 5.3% higher this winter (November to February) than last winter, with 59% of the increase supplied by coal generation, which was up 8% year-over-year, or by 40 000 GWh,” he said in a note.

Peabody’s NYSE-listed stock on Thursday morning rose 2.3%, or $0.41 a share, to $17.83 apiece.