Finally, troubled met-coal producer Walter Energy (WLTGQ) announced a series of concrete steps to improve its cost profile. The company previously announced the idling of its Canadian operations. In addition, Walter Energy cut its capital spending to $130 million, announced a sale of the Blue Creek Coal Terminal for $25 million, and voluntarily delisted from the Toronto Stock Exchange. Will these moves turn the fate of the pressured company?

The idling of Canadian operations will improve results
Walter Energy waited as long as possible before making a decision to idle its Canadian mines. This move will bring almost immediate benefits to the bottom line, as Canadian and U.K. operations were a source of a $52.6 million operating loss in the first quarter; the company's U.S. operations brought in a $5.9 million operating profit. The company stated that the cost of idling its Canadian operations was significantly less than $10 million a quarter and probably closer to $5 million. Thus, improvements to Walter's bottom line will be significant.

Walter Energy is in a position where it must squeeze every penny it can, which explains the decision to delist from the Toronto Stock Exchange. Cliffs Natural Resources (CLF -0.10%) recently made a similar move when it decided to delist from Euronext Paris in order to lower its costs. Cliffs Natural Resources also produces met coal, which contributed to the company's first-quarter loss. The decision to delist from the Toronto Stock Exchange will not add much to Walter Energy's bottom line, but the company needs each and every dollar of savings.

Asset and inventory sales underway
The sale of the Blue Creek Coal Terminal marks the start of a $250 million asset-sale program. During the recent earnings call, Walter Energy stated that it will not push asset sales as the prices remain exceptionally low. An important point to consider is the difficulty of finding a buyer; even producers that continued to grow their met-coal production like BHP Billiton (BHP 0.22%) are at the end of their expansion cycle.

Walter Energy has bought itself more time with the stoppage of cash outflow from its Canadian operations. Now, the company's performance mostly depends on the results from its two Alabama mines, mine No. 4 and mine No. 7. The company cut its met-coal production guidance to a range of 9 million-10 million tons. Importantly, Walter Energy will be unloading its inventory and targets total 2014 sales to reach 10.5 million-11.5 million tons. The company stated that it is focused on getting at least $125 million from its inventory sales by year-end. 

It looks like Walter has solved its near-term liquidity problems; the company had $405 million of cash on the balance sheet at the end of the first quarter, which is more than enough to cover its expenses this year. The recent $550 million debt issuance has pushed the first significant debt maturity into 2018. However, this will be a $1 billion debt maturity, so Walter must make significant progress to be able to refinance this debt.

Bottom line
The worst-case scenario is not happening to Walter Energy, but problems remain. The company's efforts improved the near-term liquidity situation, but long-term risks remain a serious concern. Walter needs improvements on the met-coal price front, and the sooner the better.