UPDATE 3-Coal miner Consol's profit jumps; will trim output
Thu Apr 23, 2009 12:08pm EDT
reuters.com
* Q1 earnings more than double to $1.08/share
* Revenue $1.22 billion vs $1.03 billion
* Says to trim coal production because of weak demand
* Stock up 12 percent (Recasts, adds CEO comments from call, stock up)
By Steve James
NEW YORK, April 23 (Reuters) - Coal miner Consol Energy Inc (CNX.N) said on Thursday that first-quarter profit more than doubled on higher coal prices, but it plans to trim output because of soft demand from steelmakers and power generators.
The results beat Wall Street estimates and the company's stock soared 12.3 percent to $29.09 in morning trading on the New York Stock Exchange.
"It was a very nice beat and people are reacting positively," said Jeremy Sussman, a coal industry analyst with Natixis Bleichroeder. "They did bring down their production guidance, but the net is not a huge effect."
Consol said it had revised its production target from 63 million tons to 62 million tons for 2009 and for the second quarter it aims to produce around 14.9 million tons -- down from 16.0 million in the first quarter.
"We're aggressively managing coal production at our mines, carefully managing our relatively low inventory levels, and monitoring our liquidity during this period of tight credit markets and cloudy economic outlook," said Chief Executive Officer Brett Harvey.
He told Wall Street analysts on a conference call that of the million tons it would leave in the ground this year, 80 percent was from Consol's Buchanan mine in Virginia, where the company reduced operations in March due to the weak market for coking, or metallurgical, coal used to make steel.
"I think Buchanan will run in June and for the rest of the year at a lower rate of production, with shipments around 2.6 million tons," he said. In January, the company said production at Buchanan was expected to be around 3.1 million tons, or about 5 percent of Consol's annual production.
Although it benefited from higher prices, Consol's total coal sales were down in the first quarter, as the weak economy reduced coal burn at utilities and coal needs of steelmakers.
"Because of the economy, Consol Energy is working with some of its customers to postpone shipments where needed," said Harvey. "We have long-term relationships with our customers that we value highly, but we expect to capture the value for our shareholders in the contracts we have signed.
"One option we're pursuing is spreading the value over future tonnage."
First-quarter net earnings were $195.8 million, or $1.08 per share, compared with $75.1 million, or 41 cents per share, a year earlier, the Pittsburgh-based company said. Revenue rose to $1.22 billion from $1.03 billion.
Analysts on average were expecting earnings of 93 cents a share, according to Reuters Estimates.
The average realized price was $59.63 per ton, or 36.9 percent higher than in the year-earlier quarter, Consol said. But coal production was 16.0 million tons in the quarter, down from 16.2 million tons in the year-earlier quarter.
"Consol Energy will match its production with actual customer shipments," said Harvey. "We will not produce coal just to build inventory. When shipments rebound, so will our production."
Harvey said the idling of some of Consol's higher cost mines in the middle of the first quarter could help mitigate unit cost pressures during the rest of 2009.
For 2009, the company said it has essentially all of its planned coal production at an average realized price of $59.83 per ton, or nearly 23 percent higher than 2008 pricing. (Reporting by Matt Daily and Steve James; editing by John Wallace, Dave Zimmerman and Gunna Dickson) |
