Coal miner Peabody Energy Corp. said Wednesday its second-quarter profit more than doubled, beating Wall Street's expectations as the miner benefited from higher shipments, soaring global prices and tighter coal supplies worldwide.
The St. Louis-based company, among the world's biggest coal producers, reported net income of $233.4 million, or 86 cents per share, compared with $107.7 million, or 40 cents per share, in the April-through-June period a year ago.
Revenue rose 43 percent to $1.53 billion from $1.07 billion in last year's second quarter.
Analysts polled by Thomson Financial expected, on average, earnings per share of 54 cents and revenue of $1.5 billion.
Shares fell $2.50, or 3.8 percent, to close at $62.53. Over the past 52 weeks, the shares have traded between $38.42 to $88.69.
Peabody, whose coal fuels roughly one-tenth of all U.S. electricity generation and more than 2 percent of worldwide electricity, tweaked the lower end of its full-year earnings guidance, saying it expects income from continuing operations between $2.50 and $3 per share. The company said in April it expected per-share profits of $2.20 to $3 for 2008.
Peabody left unchanged its production targets of 220 million to 240 million tons of coal, with expectations of selling 240 million to 260 million tons for the year.
"We believe that the strength in the global coal markets is very long-term in nature, and we expect this will result in very attractive coal prices for many years," Richard Navarre, Peabody's president and chief commercial officer, told analysts.
Such bullishness was rooted in Peabody's belief that global demand for coal used in making steel and electricity will continue to outpace supply, while inventories in key countries _ chiefly China _ remain critically low. Coal, the company said, is expected to outrun all other energy forms over the next two decades.
Peabody said worldwide steel demand has grown at a 6 percent yearly clip, stoking the need for more of the kind of coal used in metal-making. New electrical generation requiring coal to produce the steam that drives turbines is being developed in scores of nations around the world, the company said.
All told, Peabody's top executive said, "major coal exporters are straining to keep up against this sustained demand growth."
"We believe global supply and demand is even tighter than many think," given stockpile shortfalls in China, India, Indonesia and South Africa, said Gregory Boyce, Peabody's chairman and chief executive.
The company, which Boyce said generates more than half of its earnings from outside the U.S. compared to just 1 percent five years ago, sold 59.8 million tons of coal during the quarter, compared with 57 million tons during the same period last year.
Revenue from the company's U.S. mining operations grew to $939.1 million, up from $751.7 million a year ago. Australian revenue increased to $523.5 million from $249.4 million a year ago.
Analysts seemed generally pleased with Peabody's showing. RBC Capital Markets analyst John Kang, who rates Peabody's stock "outperform," raised his price target for the company to $90 from $60 "on the strength of underlying fundamentals in both the U.S. and international coal industries that could permanently propel the insulated U.S. coal market onto the world stage."
Over the first half of this year, Peabody earned $290.6 million, or $1.07 per share, on $2.81 billion in revenues. During the same period last year, the miner's earnings of $196.2 million, or 73 cents per share, came on revenues of $2.18 billion. Peabody's 121 million tons of coal sold in the first six month of this year compared with 112.7 million tons a year ago.
Peabody said second-quarter coal shipments from Australia jumped 15 percent over the previous year, with the companies per-ton revenues on that continent soaring 84 percent. Peabody's average per-ton revenues in the U.S. grew 22 percent on higher pricing in all regions.
Peabody said Monday it has completed a $50 million expansion of an Australian mining complex that exports coal to Asia. The New South Wales operation's expansion included development of a mine expected to produce more than 2.5 million tons per year, complementing an existing mine there that last year produced more than 4 million tons.
Australia produces 60 percent of the world's seaborne coal used in steel-making, Peabody said.
Combined with high ocean shipping rates and the weak dollar, strong demand for coal has helped fuel a resurgence in U.S. coal exports. The global thirst for coal has been robust in countries such as China and India _ something Peabody doesn't think will change any time soon.
The miner said China has idled more than 60 coal plants because coal inventories have shrunk to less than three days supply. China also has trimmed its coal exports by more than 8 percent this year and announced plans to lower or eliminate its coal import tariffs, Peabody said.
Peabody also said India will need 78,000 megawatts of new coal-fueled generation by 2012, meaning an additional 265 million tons of coal use in that country.
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On the Net:
Peabody Energy Corp., http://www.peabodyenergy.com
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