Peabody Energy Corp. (BTU)
Q4 2009 Earnings Call Transcript
January 26, 2010 11:00 a.m. ET

Executives

Vic Svec - SVP, Investor Relations and Corporate Communications
Gregory H. Boyce - Chairman and Chief Executive Officer
Michael C. Crews - Executive Vice President and Chief Financial Officer
Richard A. Navarre - President and Chief Commercial Officer

Analysts

Michael Dudas - Jefferies & Company
Brian Singer - Goldman Sachs
David Khani - FBR Capital Markets & Co.
Paul Forward - Stifel Nicolaus & Company, Inc.
Kuni Chen - Banc of America/Merrill Lynch
Mark Liinamaa - Morgan Stanley
David Gagliano - Credit Suisse
David Lipschitz - CLSA
Curtis Woodworth - Macquarie Research Equities
Jeremy Sussman - Brean Murray, Carret & Co.
Pearce Hammond - Simmons & Company International
Meredith Bandy - BMO Capital Markets
John Bridges - J.P. Morgan Securities Inc.
Shneur Gershuni - UBS

Presentation

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Peabody Energy Year End Earnings Call. Before the conference all the participants are in a listen-only mode. However there will be an opportunity for your questions and instructions will be given at that time. If you need any assistance please star then zero. As a reminder, today’s call is being recorded.

With that being said, I’ll turn the conference over to the Senior Vice President, Investor Relations, Corporate Communication, Mr. Vic Svec. Please go ahead.

Vic Svec

Well, John. And good morning, everyone. Thanks very much for taking part in the conference call for BTU this morning. And with us today are Chairman and CEO, Greg Boyce; Executive Vice President and CFO, Mike Crews, as well as, President and Chief Commercial Officer, Rick Navarre.

Our forward-looking statements should be considered along with the risk factors that we note at the end of the release, as well as, the MD&A section of our filed documents, and we also refer you to peabodyenergy.com for additional information.

With that, I’ll turn the call over to Greg.

Gregory H. Boyce

Thanks, Vic. And good morning, everyone. In 2009 Peabody turned in superior results in the face of the great recession. We reported our second best earnings in our 126 year history, second only to 2008. We expanded our U.S. margins thanks to our contracting strategies and cost containment actions, shipped record thermal and met coal to China, unveiled a five-year plan to double our Australian exports, built out our Asian business development and trading activities and raised our liquidity to record levels.
As operators, marketers, developers and portfolio managers, we have long designed Peabody to make money in all market conditions and great money in good markets. Having weathered the worst of the global recession, we’re looking at improving market fundamentals and are poised to deliver on the many growth opportunities we see.

Now turning to the improved market conditions, benchmark thermal coal prices have risen to reflect higher electricity demand, which is set to return to solid grades around the world and metallurgical coal prices this year are likely to set the second highest benchmark. Global steel production is forecast to climb 9% in 2010.

It’s clear that China, India and emerging Asia remain at a full throttle base that continues to dwarf the U.S. and Atlantic. Industrial production soared at rates of 10% to 30% late in 2009, in places such as China, India, Korea and Taiwan.

Last year, the Pacific seaborne markets were driven by one trend, China imports. This year, we see China maintaining or increasing the strong level of imports with the only limiting factor being the growth in imports by other Asian nations that are quickly recovering. As such, we appear on track for another year of 8% growth in Pacific seaborne coal demand.

China, of course, is the major force reshaping global resource markets. I’ll address the simple question we’ve heard for years, is the import trend in China sustainable? In a word, yes.

We’re in a new paradigm, and I’m convinced that China will remain a significant importer based on domestic need, strategic intent and aggressive actions to acquire resources outside of its boarders.