Peabody reports 2012 losses, expects more in first quarter of 2013

January 30, 2013

Peabody Energy, the largest private sector coal company in the world, reported US$1 billion in losses for the fourth quarter of 2012 and a full year loss of $575.1 million.

The company also announced that it expects to struggle through the first quarter of 2013 as it is targeting an adjusted diluted loss per share of $0.26 to $0.04 for the first quarter of 2013. The targets “reflect expectations of higher Australian costs related to the timing of additional overburden removal and startup costs associated with the transition to owner operator; lower realized metallurgical coal pricing; and lower U.S. sales and pricing.”

Peabody’s fourth-quarter losses were $1.01 billion or $3.78/share (compared to a profit of $222.4 million or 82-cents/share for the fourth quarter of 2011) and a full-year 2012 loss of $585.7 million or $2.19/share, compared with a profit of $957.7 million and $3.52/share for full-year 2011.

The 2012 results included charges of $3.88/share in after-tax asset impairment and mine closure costs, tax charges, and re-measurement expense on foreign tax accounts. Peabody recorded pre-tax assessment impairment charges totaling $884 million related to Australian operations and other non-core assets. The company also recorded $45 million in charges associated with the closure of the Willow Lake Mine in the United States.

“Asset values across several commodities have recently been impacted by significant price declines. Global metallurgical coal prices, for instance, have fallen below the highs set in 2011,” said Peabody chief financial officer Michael C. Crews. “These price declines factored into our impairment review and required Peabody to adjust the value of certain assets, which resulted in these non-cash charges.”

“Global coal markets remained challenged in 2012, with strong increases in seaborne thermal demand but a weak global pricing environment and significant declines in U.S. coal use,” said Peabody chief executive officer Greg Boyce. “Turning to 2013, recent data suggests that China’s economic growth is again accelerating, and we have seen some rebound in global coal prices, while European and U.S. economies are likely to remain sluggish.”

Boyce noted that the World Steel Association is forecasting a 3 percent growth in global steel production this year, resulting in growth in seaborne metallurgical demand. “We expect seaborne thermal coal demand to grow in 2013 in excess of 36 Mt (40 million st),” he forecast. “We are looking for approximately 75GW of new coal fuel generation to come online globally in 2013, which will require another 235 Mt/a (260 million stpy) at full capacity.”

“Led by a 36 Mt to 54 Mt (40 million to 60 million st) increase in U.S. coal use, we expect U.S. met and thermal coal exports to fall from 2012 levels due to current pricing in the seaborne market. And based on producer announcements and early trends we are seeing so far this year, we [expect] the U.S. production to continue to decline in 2013,” Boyce added.

For full-year 2013, Peabody is targeting total U.S. sales of 163 Mt to 172 Mt (180 million to 190 million st), Australia sales and 30 Mt to 35 Mt (33 million to 36 million st), and the remainder from trading and brokerage activities.

Peabody advised that 2013 U.S. coal production is 90- to 95 percent priced, with 2014 production currently 50- to 60 percent priced at comparable 2013 production levels.



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