The Coal Industry Recharges After Arch Coal Results

Although it has been a dismal year for the coal industry, many companies received a boost on Friday after one of the world’s top coal producers reported better-than-expected earnings.

Arch Coal (NYSE:ACI), which sold 157 million tons of coal last year, said profit surged to $45.8 million (22 cents per share) in the third quarter, compared to only $8.9 million (4 cents per share) a year earlier. Excluding one-time items, earnings came in at 20 cents per share. By that measure, the company beat the mean analyst estimate for a loss of 15 cents per share. Revenue fell 9 percent to $1.09 billion, but still managed to beat the average analyst estimate of $1 billion.

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“Arch’s third quarter performance reflects improvement over the second quarter due to our cost control efforts and modestly better domestic thermal markets driven by favorable summer weather and higher competing fuel prices,” said John W. Eaves, Arch’s president and chief executive officer, in a press release. “During the third quarter, we saw margins in both of our western regions expand due to increased shipment levels, higher price realizations and strong cost control.”

He also added, “Looking ahead, we believe global coal markets are in the process of correcting – with the domestic thermal market building some momentum while metallurgical markets are bottoming out. Because we expect global coal market conditions to remain challenging in 2013, Arch is executing a strategy to successfully navigate this weak market.  Our plan is focused on improving operational efficiency, optimizing our asset base and preserving liquidity so we are well positioned to capitalize as the market recovers.”

The better-than-expected financial results and talk of correcting had an immediate effect on shares. Arch Coal jumped 10 percent higher in Friday afternoon trading. Other companies such as Peabody Energy (NYSE:BTU) and Alpha Natural Resources (NYSE:ANR) also climbed higher. Meanwhile, Consol Energy (NYSE:CNX) increased more than 1 percent, but BHP Billiton (NYSE:BHP) fell nearly 2 percent.

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