This summary is based on the second quarter fiscal 2008 earnings call conducted by Peabody Energy Corp. (BTU) on July 23, 2008.
Management:
Chairman and CEO: Gregory H. Boyce
CFO and EVP: Michael C Crews
Chief Commercial Officer: Richard A. Navarre
Key Investor Issues:
- Quarter-to-quarter revenues increased from $1.07 billion to $1.53 billion
- Quarterly EPS were 89 cents compared with 37 cents in the year ago quarter.
- The new 2008 EPS target of $2.50 to $3 is nearly double prior-year result.
Second-Quarter Financial Highlights:
The second quarter income from continuing operations rose 143% to a record $242.6 million versus the prior year.
- The EPS were 89 cents, an increase of 141% from the same period last year.
The company increased Australia coal shipments by 15% over the prior year.
- The Australian revenues per ton rose 84% reflecting higher pricing on new contracts, partly offset by carry-over volumes at prior year pricing.
- The carry-over commitments were primarily shipped early in Q2 and were largely completed by the end of the quarter.
- In the U.S., the average revenues per ton grew 22% on higher pricing in all regions.
The EBITDA totaled $446.6 million versus $270.9 million in the previous year quarter.
- This represents a 65% improvement.
- The combined U.S. and Australia mining operations more than doubled their EBITDA over the prior year.
- The operations overcame more than $110 million of EBITDA impacts associated with increased commodity/maintenance/supply costs, Australian currency effects, severe Midwestern flooding and two major outages to install new equipment at the company’s largest mine.
- This was offset by nearly $54 million in revenues related to recovery of reclamation and retiree healthcare costs under a major coal supply agreement.
- Compared with last year, EBITDA from Trading and Brokerage increased 44%, while the timing of transactions led to $53 million in lower Resource Management EBITDA.
The management reported that the strong operational performance resulted in operating profit of $343.8 million, 92% above the last year.
- The company’s tax expense totaled $43.6 million during the quarter.
- The income from continuing operations totaled $242.6 million versus $99.7 million in the same period last year.
- The employees also set a new company record for first-half safety performance, which included a U.S. incidence rate of just 1.52 per 200,000 hours worked.
Global Coal Markets and Company’s Position:
- The coal demand continues to outpace supply all over the world.
- For the fifth consecutive year, coal has been the fastest-growing fuel globally.
- More than 75 nations are developing new coal-fueled generation.
- The management reported that the growth of coal is forecast to outpace all other energy forms over the next two decades.
International:
- The global coal markets serving both steel production and electricity generation continued to tighten during the quarter, marked by record growing demand as well as declining inventories.
- Seaborne metallurgical coal demand continues to increase, helped by world steel production that is 6% higher than last year.
- Australia produces 60% of the world’s seaborne metallurgical coal.
- The contract price negotiations for deliveries through next March have been largely concluded based on the $300 per metric ton benchmark price for Australia’s high-quality hard coking coal.
- The global thermal coal use continues to increase thus fueling the growing number of coal-fueled generating plans.
- Stockpiles are very low in many nations and producers and shippers are operating at high capacity levels in an effort to keep with demand.
- The industry has priced significant volumes off of the reference price of $125 per metric ton for Newcastle thermal coal, and strong demand since the settlements has sent spot prices to $175 to $300 per ton.
- During the quarter, the company priced nearly 11 million tons of Australia metallurgical and thermal coal through March 2009, based on reference coal prices.
- The company’s un-priced Australian metallurgical coal volumes include six to seven million tons for the last three quarters of 2009 and 10 to 11 million tons for 2010.
- The un-priced Australian thermal coal volumes include six to seven million tons for the last three quarters of 2009 and 12 to 13 million tons for 2010.
