Habéis visto el IBEX35?: AGOSTO 2014: en agosto cotizará en máximos el hemoal +
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ni PePe ni PeSOE
Madmaxista
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Señor Robopoli: ahora que tenemos las ATHM lanzadas voy a hacer la pregunta sencilla del dia: es razonable esperar que supere los maximos de 51?
A ver si Manh se anima tambien 😛
A ver si Manh se anima tambien 😛
Janus
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a mi me parece que los resultados de JC Penney, tras revisarlos, son simplemente brutales para la situación de la empresa.
Tiene mucha deuda y dudas fundadas sobre la deriva de los ingresos salvo que sea mitigada a costa de subir ventas tirando precios con lo que el margen se derrumba y desaparece la capacidad de repago de la deuda.
Simplemente resumir los resultados en: incrementa las ventas subiendo el margen. Exactamente lo que quiere oir la pléyade de buitres que buscan el giro de largo plazo.
El momento mágico puede producirse: es aquel en el que los cortos se cierran y además aparecen fondos estables que compran buscando el largo plazo. Combinación que ya hemos visto en su día en First Solar.
---------- Post added 15-ago-2014 at 05:14 ----------
Venga, para los buhos.
[YOUTUBE]ZpdpBic_aQg[/YOUTUBE]
[YOUTUBE]5dqqMp_hNEM[/YOUTUBE]
Tiene mucha deuda y dudas fundadas sobre la deriva de los ingresos salvo que sea mitigada a costa de subir ventas tirando precios con lo que el margen se derrumba y desaparece la capacidad de repago de la deuda.
Simplemente resumir los resultados en: incrementa las ventas subiendo el margen. Exactamente lo que quiere oir la pléyade de buitres que buscan el giro de largo plazo.
El momento mágico puede producirse: es aquel en el que los cortos se cierran y además aparecen fondos estables que compran buscando el largo plazo. Combinación que ya hemos visto en su día en First Solar.
---------- Post added 15-ago-2014 at 05:14 ----------
Venga, para los buhos.
[YOUTUBE]ZpdpBic_aQg[/YOUTUBE]
[YOUTUBE]5dqqMp_hNEM[/YOUTUBE]
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bertok
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Buenos días
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Topongo
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Buen post de primera hora!
Por la mañana lencería por la tarde boobs
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Enviado desde mi GT-I9505 mediante Tapatalk
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bertok
Será en Octubre
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bertok
Será en Octubre
El SP nos dirá hoy por dónde va.
Voy corto con 3 minis desde ayer, a ver si el descendientemio de pandoro aparece de un fruta vez por nueva york 😛ienso:😛ienso:😛ienso:
Voy corto con 3 minis desde ayer, a ver si el descendientemio de pandoro aparece de un fruta vez por nueva york 😛ienso:😛ienso:😛ienso:
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mpbk
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Chila
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Ninguna pega oigan.
¿habeis visto el ssubidon de las farmas que investigan en ebola?
bertok
Será en Octubre
mpbk
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que agallas hace el dow jones subiendo tanto..........
---------- Post added 15-ago-2014 at 10:59 ----------
yo soy asi yo siempre digo lo que pienso, que esta noche tu y yo vamos a llenarnos de placer, lo que te haga no vas a olvidar, dejate llevaaarrr
que farmaceuticas son?
la verdad es que estoy out...
---------- Post added 15-ago-2014 at 10:59 ----------
como se llama esta preciosidad?
---------- Post added 15-ago-2014 at 11:04 ----------
añado largos ibex
jojojojo
---------- Post added 15-ago-2014 at 10:59 ----------
yo soy asi yo siempre digo lo que pienso, que esta noche tu y yo vamos a llenarnos de placer, lo que te haga no vas a olvidar, dejate llevaaarrr
que farmaceuticas son?
la verdad es que estoy out...
---------- Post added 15-ago-2014 at 10:59 ----------
como se llama esta preciosidad?
---------- Post added 15-ago-2014 at 11:04 ----------
añado largos ibex
jojojojo
pipoapipo
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en mi gacelera opinion como hoy usa cierre verde hay subida para unos cuantos dias mas
para ver aqui el 10600 o mas
pollo dijo q veriamos probablemente el 2020 en USA, asi q ahora mismo supongo q el lado corto es para los q quieran perder platita y sentir a pandoro
para ver aqui el 10600 o mas
pollo dijo q veriamos probablemente el 2020 en USA, asi q ahora mismo supongo q el lado corto es para los q quieran perder platita y sentir a pandoro
atman
Madmaxista
Creo que no ha dicho eso. Ha dicho que ese nivel parece quedar pendiente. Pero para eso hace falta un dinero que está de vacaciones... o de retiro espiritual para una temporada... aunque hoy parece que hay algo de movimiento.
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bertok
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Todo lo que se necesita saber sobre ANR, su negocio y perspectivas :
: :: ::
A guide to Alpha Natural Resources
Alpha Natural Resources
With revenue of over $5 billion for fiscal 2013, Alpha Natural Resources (ANR) is the second-largest publicly traded coal producer (XME) in the U.S. It’s behind only Peabody Energy (BTU). Alpha Natural Resources (ANR) is the largest American producer and exporter of metallurgical coal. Alpha also produces and sells thermal coal in both domestic and international markets.
The company’s coal operations are primarily divided into three segments:
- Eastern steam coal
- Western steam coal
- Metallurgical coal
Eastern steam coal refers to steam coal (or thermal coal) mined in Appalachia (Virginia, West Virginia, Kentucky, and Pennsylvania). Western steam coal includes coal mined from the company’s two mines in Powder River Basin (or PRB) in Wyoming. The company mines metallurgical coal in Appalachia. The company’s Western coal operations (steam and metallurgical) had 86 mines as of March 31, 2014, out of which 60 were underground and the remaining were surface mines.
Apart from coal operations, the company produces and sells other allied commodities and also provides freight and handling services
Product mix
Out of total revenues of $1.05 billion in 2Q2014, the company derived $532 million (or 49.5%) through steam coal, $388 million (or 36.1%) through metallurgical coal, and the remainder through other products and services.
While the company derives 36% of its revenues from metallurgical (or met) coal, met coal accounted for only 22.5% of total tons sold. This is because metallurgical coal is pricier than thermal coal.
Alpha Natural Resources’ product mix sits in between Walter Energy’s (WLT), which derives almost all its revenues through met coal, and Cloud Peak Energy’s (CLD), which derives all its revenues from thermal coal. For a more detailed overview of Alpha Natural Resources, read Market Realist’s in-depth analysis.
The company’s status as the biggest met coal producer in the U.S. has turned against Alpha in the last few quarters
Why Alpha Natural Resources is battling a weak met coal market
Challenges facing the U.S. met coal industry
Demand from China is slowing for multiple reasons. These include rising production in Australia and slowing economic growth. China imported 3.9 million tons of coal from the U.S. in Q1 2013. In Q1, imports fell to just 781 thousand tons.
The majority of the metallurgical coal exported by the U.S. went to Asian countries in the past. With rising production levels in Australia and a depreciating Australian dollar, Asian countries find it more cost-effective to import from Australia than from the U.S. According to Alpha’s management, Australian year-to-date exports were up 13% (or by 10 million tons) to 90 million tons.
The prices reached as high as $330 per ton in 2011 due to shortages on account of floods in Australia. Many coal producers—including Alpha, Arch Coal (ACI), and Walter Energy (WLT)—acquired met coal assets through debt, hoping that the met coal price rally would continue.
With the current state of oversupply, the benchmark price for met coal has fallen to $120 per ton. The lower prices and lower demand from Asia have resulted in a difficult time for U.S. metallurgical coal producers (XME). These producers (including Alpha) had to respond to the tough time by implementing production cuts and idling mines. The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers.
While Peabody Energy (BTU) doesn’t have any metallurgical coal assets in the U.S., its Australian operations are hampered by lower metallurgical coal prices. Peabody Energy (BTU) recently announced production cuts at its Australian mine to the tune of 1.5 million tons. To learn more, see our 2Q2014 earnings update for Walter Energy, Being a pure play met coal producer isn’t good for Walter Energy
Assessing Alpha Natural Resources’ 2Q14 met coal business
Alpha Natural Resources’ met coal business
Alpha Natural Resources (ANR) is the biggest producer (XME) and exporter of met coal in the U.S. The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers. Alpha Natural Resources is the world’s third largest metallurgical coal exporter, behind only Australian exporters like BHP Billiton.
The company sold 20.1 million tons of met coal in FY13, out of which 14.9 million tons (or 74%) was exported to customers in 29 countries across North America, Europe, South America, Asia, and Africa. The company has 25 million tons in export capacity at ports through the East Coast and Gulf of Mexico
Met coal revenues and shipments
As export demand moderated, shipments of met coal also moderated. The revenues of the company were affected by lower volume as well as lower sales realization per ton.
The company’s metallurgical coal volumes were down 20% to 4.5 million tons in the quarter compared to 5.6 million tons in 2Q2013. The realization per ton for met coal was also down to $86.3 in 2Q2014 from $101 in 2Q2013. The lower shipments coupled with lower realization per ton resulted in the company’s met coal revenues dropping by 31.6% to $388 million in 2Q2013 from $567 million in 2Q2013.
Management’s take on the met coal business
According to management, producers have announced 20 million tons of production cuts globally. Some of these production cuts haven’t materialized yet, as some mines have yet to be idled or sell remaining inventory. Management expects the production cuts to fully come in effect and expects another 5 to 10 million tons in cuts in the second half of the year.
Arch Coal (ACI), Walter Energy (WLT), and Peabody Energy (BTU) have announced mine idling and production cuts recently. While management isn’t bullish on the prospects of its met coal business over the next few quarters, it expects met coal prices to at least stabilize going into 2015.
Within the met coal business, management expects the Atlantic market (exports to Europe) to do better than the Pacific market (exports to Asia), as the Pacific market will remain oversupplied due to its proximity to Australia. Europe’s steel production is up 3.8% in the first half of 2014. If the momentum continues, the export demand for metallurgical coal from Europe will pick up.
The met coal business is going through a rough patch. So is the thermal coal business
Why weak rail connectivity affects Alpha’s steam coal business
Alpha’s steam coal business
Just like the met coal business, volumes and realization per ton at the Alpha’s (ANR) thermal coal business were down—though less dramatically. Thermal coal revenues were down 4.4% (or $24.3 million) to $531.5 million in 2Q2014 from $555.8 in 2Q2013
The Eastern coal business shipped 7.5 million tons of steam coal in 2Q2014. This was around 0.3 million tons more than the 7.2 million tons shipped in 2Q2013. But realization per ton dropped to $58.5 in 2Q2014 from $62.5 in 2Q2013. This resulted in revenues from the Eastern steam coal segment dropping 2% to $438 million.
Western coal (with mines in the Powder River Basin, or PRB, Wyoming) volume dropped to 7.9 million tons in 2Q2014 from 8.8 million tons in 2Q2013. This fall was primarily due to rail underperformance and production curtailments. The company’s sales realization for Western steam coal was also down to $11.81 in 2Q2014 from $12.37 in 2Q2013.
PRB rail connectivity
Underperformance of rail connectivity has been a key issue for coal producers (XME) operating out of PRB, including Alpha (ANR), Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD). Producers have been forced to reduce guidance, as they’re not in a position to deliver committed coal to customers due to rail connectivity issues. Rail connectivity issues have added to coal producers’ costs per ton as fixed costs are divided over fewer tons.
Railroad companies are understaffed. Moreover, coal has to compete with other commodities offering higher margins to railroads for rail wagons. So management doesn’t expect connectivity to improve materially during the rest of 2014.
Apart from PRB rail connectivity issues, competition for the company’s Western steam coal business from the Illinois basin and regulatory issues are hampering the company’s thermal coal business.
Met and thermal coal volumes are down. So are realizations per ton. The only way the company can maintain its gross margin per ton is through cost cuts
Alpha Natural Resources’ latest cost performance is spectacular
Higher gross margin per ton
As you saw in the previous parts of this series, volumes and pricing for both met coal and thermal coal remained subdued during the quarter. Alpha Natural Resources (ANR) seems to have responded well to the challenge by cutting costs
Eastern coal operations’ (met and thermal combined) cost of sales per ton dropped to $62 in 2Q2014 from $74.4 in 2Q2013 and $65.72 in 1Q2014. The company achieved this cost reduction through various measures. These measures include curtailing production in high-cost mines and other programs.
The cost of sales per ton at the company’s Western operations came in higher, at $12.06 compared to $10.08 in 2Q2013 and $10.23 in 1Q2014. This result was primarily due to lower shipments resulting from poor rail connectivity. But cost saving in the Eastern operations offset the higher cost in the West.
The average cost per ton came in at $42.14. This result was lower than 2Q2013′s $48.2 but higher than 1Q2014′s $41.25. Apart from reducing operating costs, the company has also reduced its capital expenditure. The company has recently announced idling of up to 11 surface mines and support operations in West Virginia that could result in 1,100 job cuts.
Other coal producers (XME)—like Arch Coal (ACI), Peabody Energy (BTU), and Walter Coal (WLT)—are also undertaking cost saving initiatives like idling mines and curtailing production to sail through this difficult time.
Can costs go down any further?
Kevin Crutchfield, chairman and CEO, said during the conference call, “In terms of additional big cost leverage, we don’t have anything of the scale that we’ve announced previously.” This shows that costs may have bottomed out. In fact, with miners’ holidays coming up in 3Q, costs may rise marginally.
So did the higher margin per ton help the company curtail losses?
Why cost savings helped Alpha Natural Resources’ 2Q14 earnings
Lower adjusted EBITDA due to lower tonnage
Alpha Natural Resources (ANR) reported adjusted earnings before interest, taxes, depreciation, and amortization (or adjusted EBITDA) of $75.7 million for 2Q2014. During the same period last year, the company had reported adjusted EBITDA of $97.6 million. While the company’s margins per ton improved, the lower tonnage resulted in lower revenues and, in turn, lower adjusted EBITDA
The bottom line
The company reported net losses of $512.6 million for 2Q2014 compared to net losses of $185.7 for 2Q2013. The difference was largely due to $308.7 million in non-cash goodwill impairment expenses. The company impaired goodwill on the balance sheet at its Eastern operations due to loss of value.
On a per-share basis, the net losses came in at $2.32 for 2Q2014 compared to $0.84 for 2Q2013. Other major coal producers (XME)—like Peabody Energy (BTU), Walter Energy (WLT), and Arch Coal (ACI)—have also posted net losses during the quarter.
The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers. To read about Walter Energy’s 2Q2014 earnings, read the Market Realist series Being a pure play met coal producer isn’t good for Walter Energy.
The cash burn continues
While Alpha Natural Resources (ANR) exhibited stellar cost performance during the quarter, its free cash flows came in at -$260 compared to free cash burn of $60.7 million in 2Q2013. Two major uses of cash were a legal settlement (net of insurance receipts) of $195 million and capital expenditure (or capex) of $43 million.
If Alpha is still burning cash, where is it funding its losses from?
How is Alpha Natural Resources funding its losses?
Sources and uses of funds
As you saw in the previous part of this series, Alpha Natural Resources (ANR) has burnt $260 million during the quarter despite stellar cost performance. The company has been burning cash for some quarters now due to the unfavorable industry environment. In this environment, there are only two options left for the company. One is to sell assets and the other is to raise additional debt.
In December 2013, the company sold its stake in its Marcellus Shale joint venture to its partner, Rice Energy (RICE), for $100 million in cash and $200 million in Rice Energy shares. As the lockup period ended on July 22, the company is contemplating the sale of its Rice Energy’s shares. The shares are worth an estimated $290 million. The company still has 10,000 acres of space in the Marcellus Shale that it has yet to explore.
The company issued $500 million in senior secured notes maturing in August 2020 during the quarter. The majority of the proceeds were used to fund losses and towards meeting working capital requirements. The company also incurred capex of $43 million during the quarter.
The company used $149 million of the proceeds to boost cash and cash equivalents to $768.5 million. As of June 30, the company had total liquidity of $2.4 billion, including marketable securities of $600 million and unused bank lines of $967 million in addition to available cash and cash equivalents.
With mounting losses, major coal producers (XME) like Peabody Energy (BTU) and Walter Energy (WLT) are building liquidity to stay solvent, hoping for coal prices to pick up.
Alpha saved costs but continued to take losses. How did the market react to Alpha’s performance?
Why Alpha Natural Resources gained despite its Q2 2014 losses
Exceeding expectations
Alpha Natural Resources’ (ANR) share rallied 8.2% on August 6, when it announced the 2Q2014 results. The results surpassed analyst expectations on almost all counts.
Sales came in at $1.05 billion against expectations of $1.03 billion. The adjusted net loss came in at $123.4 million—lower than the expected loss of $178.6 million. The adjusted loss per share came in at $0.56 against expectations of -$0.742.
The company surpassed expectations primarily because of the stellar cost performance in the Appalachian.
Peabody Energy (BTU) was up 1.22%, Arch Coal (ACI) was up 2.25%, and Cloud Peak Energy was up 1.48% on August 6.
What are analysts saying about the company?
JP Morgan (JPM) reaffirmed its “Neutral” rating on Alpha, with a price target of $5 (a 29% premium over the current price of $3.87). Brean Capital also maintained its “Hold” rating but issued a lower price target at $3.35.
Analysts acknowledge the cost reduction efforts the company has taken during the quarter for bringing Eastern costs to a multi-year low of $62 a ton.
Management’s take
Management seems to be cautiously optimistic about the met coal business and expects prices to at least stabilize at the start of 2015. While production cuts to the tune of 20 million tons are announced globally, management says that another 5 million to 10 million tons of cuts are required to arrest the fall in met coal prices.
Management has acknowledged challenges on the thermal coal front. Most prominent of these challenged is the threat from low natural gas prices and regulatory issues surrounding coal. The PRB rail issue isn’t expected to change materially before the start of 2015.
Moreover, coal stocks at utilities are running low. But there seems to be no hurry to fill stocks. To learn more about challenges facing the U.S. coal industry (XME), read the Market Realist series Must-know: Why coal producers’ stocks are declining.
Alpha Natural Resources’ guidance for the rest of 2014
2014 guidance
Alpha Natural Resources (ANR) revised its guidance downward. It now expects to sell 75 million to 80 million tons of coal in full-year 2014. The guidance includes:
15 million to 18 million tons of met coal
34 million to 37 million tons of Western steam coal
26 million to 30 million tons of Eastern steam coal
Notably, the guidance for the Western steam coal is down from an earlier 37 million to 40 million tons due to ongoing troubles with PRB rail connectivity.
As you saw earlier in this series, the company expects costs to go up marginally during the third quarter due to miners’ holidays.
A look into the future
The coal industry (XME) isn’t having a good time. To make matters worse, met coal producers have greater difficulty due to oversupply in the market and rising production levels in Australia. The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers.
Management has maintained a cautious tone in its guidance, acknowledging the issues facing the company and the industry. The company has started taking steps to survive through the difficult time. It has built large liquidity of around $2.8 billion to stay afloat while cash burn continues. The company has worked hard during the quarter to save costs, resulting in lower-than-expected losses.
All these efforts have put the company in a better position to survive the downturn than it was a couple of quarters back, when analysts questioned the company’s future.
However, the path isn’t easy. The company has $3.9 billion debt piling over it. As the company’s still burning cash, the debt load may remain for a long time. This could result in continued large outgoing interest. So a marginal improvement in coal prices may not help the company come out of trouble. Plus, the costs may not go down any further.
So the short-to-medium-term outlook for Alpha looks grim. But if met coal producers across the globe act sensibly to curb the oversupply, the whole industry will benefit from rising prices.
: :: :: A guide to Alpha Natural Resources
Alpha Natural Resources
With revenue of over $5 billion for fiscal 2013, Alpha Natural Resources (ANR) is the second-largest publicly traded coal producer (XME) in the U.S. It’s behind only Peabody Energy (BTU). Alpha Natural Resources (ANR) is the largest American producer and exporter of metallurgical coal. Alpha also produces and sells thermal coal in both domestic and international markets.
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The company’s coal operations are primarily divided into three segments:
- Eastern steam coal
- Western steam coal
- Metallurgical coal
Eastern steam coal refers to steam coal (or thermal coal) mined in Appalachia (Virginia, West Virginia, Kentucky, and Pennsylvania). Western steam coal includes coal mined from the company’s two mines in Powder River Basin (or PRB) in Wyoming. The company mines metallurgical coal in Appalachia. The company’s Western coal operations (steam and metallurgical) had 86 mines as of March 31, 2014, out of which 60 were underground and the remaining were surface mines.
Apart from coal operations, the company produces and sells other allied commodities and also provides freight and handling services
Product mix
Out of total revenues of $1.05 billion in 2Q2014, the company derived $532 million (or 49.5%) through steam coal, $388 million (or 36.1%) through metallurgical coal, and the remainder through other products and services.
While the company derives 36% of its revenues from metallurgical (or met) coal, met coal accounted for only 22.5% of total tons sold. This is because metallurgical coal is pricier than thermal coal.
Alpha Natural Resources’ product mix sits in between Walter Energy’s (WLT), which derives almost all its revenues through met coal, and Cloud Peak Energy’s (CLD), which derives all its revenues from thermal coal. For a more detailed overview of Alpha Natural Resources, read Market Realist’s in-depth analysis.
The company’s status as the biggest met coal producer in the U.S. has turned against Alpha in the last few quarters
Why Alpha Natural Resources is battling a weak met coal market
Challenges facing the U.S. met coal industry
Demand from China is slowing for multiple reasons. These include rising production in Australia and slowing economic growth. China imported 3.9 million tons of coal from the U.S. in Q1 2013. In Q1, imports fell to just 781 thousand tons.
The majority of the metallurgical coal exported by the U.S. went to Asian countries in the past. With rising production levels in Australia and a depreciating Australian dollar, Asian countries find it more cost-effective to import from Australia than from the U.S. According to Alpha’s management, Australian year-to-date exports were up 13% (or by 10 million tons) to 90 million tons.
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The prices reached as high as $330 per ton in 2011 due to shortages on account of floods in Australia. Many coal producers—including Alpha, Arch Coal (ACI), and Walter Energy (WLT)—acquired met coal assets through debt, hoping that the met coal price rally would continue.
With the current state of oversupply, the benchmark price for met coal has fallen to $120 per ton. The lower prices and lower demand from Asia have resulted in a difficult time for U.S. metallurgical coal producers (XME). These producers (including Alpha) had to respond to the tough time by implementing production cuts and idling mines. The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers.
While Peabody Energy (BTU) doesn’t have any metallurgical coal assets in the U.S., its Australian operations are hampered by lower metallurgical coal prices. Peabody Energy (BTU) recently announced production cuts at its Australian mine to the tune of 1.5 million tons. To learn more, see our 2Q2014 earnings update for Walter Energy, Being a pure play met coal producer isn’t good for Walter Energy
Assessing Alpha Natural Resources’ 2Q14 met coal business
Alpha Natural Resources’ met coal business
Alpha Natural Resources (ANR) is the biggest producer (XME) and exporter of met coal in the U.S. The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers. Alpha Natural Resources is the world’s third largest metallurgical coal exporter, behind only Australian exporters like BHP Billiton.
The company sold 20.1 million tons of met coal in FY13, out of which 14.9 million tons (or 74%) was exported to customers in 29 countries across North America, Europe, South America, Asia, and Africa. The company has 25 million tons in export capacity at ports through the East Coast and Gulf of Mexico
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Met coal revenues and shipments
As export demand moderated, shipments of met coal also moderated. The revenues of the company were affected by lower volume as well as lower sales realization per ton.
The company’s metallurgical coal volumes were down 20% to 4.5 million tons in the quarter compared to 5.6 million tons in 2Q2013. The realization per ton for met coal was also down to $86.3 in 2Q2014 from $101 in 2Q2013. The lower shipments coupled with lower realization per ton resulted in the company’s met coal revenues dropping by 31.6% to $388 million in 2Q2013 from $567 million in 2Q2013.
Management’s take on the met coal business
According to management, producers have announced 20 million tons of production cuts globally. Some of these production cuts haven’t materialized yet, as some mines have yet to be idled or sell remaining inventory. Management expects the production cuts to fully come in effect and expects another 5 to 10 million tons in cuts in the second half of the year.
Arch Coal (ACI), Walter Energy (WLT), and Peabody Energy (BTU) have announced mine idling and production cuts recently. While management isn’t bullish on the prospects of its met coal business over the next few quarters, it expects met coal prices to at least stabilize going into 2015.
Within the met coal business, management expects the Atlantic market (exports to Europe) to do better than the Pacific market (exports to Asia), as the Pacific market will remain oversupplied due to its proximity to Australia. Europe’s steel production is up 3.8% in the first half of 2014. If the momentum continues, the export demand for metallurgical coal from Europe will pick up.
The met coal business is going through a rough patch. So is the thermal coal business
Why weak rail connectivity affects Alpha’s steam coal business
Alpha’s steam coal business
Just like the met coal business, volumes and realization per ton at the Alpha’s (ANR) thermal coal business were down—though less dramatically. Thermal coal revenues were down 4.4% (or $24.3 million) to $531.5 million in 2Q2014 from $555.8 in 2Q2013
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The Eastern coal business shipped 7.5 million tons of steam coal in 2Q2014. This was around 0.3 million tons more than the 7.2 million tons shipped in 2Q2013. But realization per ton dropped to $58.5 in 2Q2014 from $62.5 in 2Q2013. This resulted in revenues from the Eastern steam coal segment dropping 2% to $438 million.
Western coal (with mines in the Powder River Basin, or PRB, Wyoming) volume dropped to 7.9 million tons in 2Q2014 from 8.8 million tons in 2Q2013. This fall was primarily due to rail underperformance and production curtailments. The company’s sales realization for Western steam coal was also down to $11.81 in 2Q2014 from $12.37 in 2Q2013.
PRB rail connectivity
Underperformance of rail connectivity has been a key issue for coal producers (XME) operating out of PRB, including Alpha (ANR), Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD). Producers have been forced to reduce guidance, as they’re not in a position to deliver committed coal to customers due to rail connectivity issues. Rail connectivity issues have added to coal producers’ costs per ton as fixed costs are divided over fewer tons.
Railroad companies are understaffed. Moreover, coal has to compete with other commodities offering higher margins to railroads for rail wagons. So management doesn’t expect connectivity to improve materially during the rest of 2014.
Apart from PRB rail connectivity issues, competition for the company’s Western steam coal business from the Illinois basin and regulatory issues are hampering the company’s thermal coal business.
Met and thermal coal volumes are down. So are realizations per ton. The only way the company can maintain its gross margin per ton is through cost cuts
Alpha Natural Resources’ latest cost performance is spectacular
Higher gross margin per ton
As you saw in the previous parts of this series, volumes and pricing for both met coal and thermal coal remained subdued during the quarter. Alpha Natural Resources (ANR) seems to have responded well to the challenge by cutting costs
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Eastern coal operations’ (met and thermal combined) cost of sales per ton dropped to $62 in 2Q2014 from $74.4 in 2Q2013 and $65.72 in 1Q2014. The company achieved this cost reduction through various measures. These measures include curtailing production in high-cost mines and other programs.
The cost of sales per ton at the company’s Western operations came in higher, at $12.06 compared to $10.08 in 2Q2013 and $10.23 in 1Q2014. This result was primarily due to lower shipments resulting from poor rail connectivity. But cost saving in the Eastern operations offset the higher cost in the West.
The average cost per ton came in at $42.14. This result was lower than 2Q2013′s $48.2 but higher than 1Q2014′s $41.25. Apart from reducing operating costs, the company has also reduced its capital expenditure. The company has recently announced idling of up to 11 surface mines and support operations in West Virginia that could result in 1,100 job cuts.
Other coal producers (XME)—like Arch Coal (ACI), Peabody Energy (BTU), and Walter Coal (WLT)—are also undertaking cost saving initiatives like idling mines and curtailing production to sail through this difficult time.
Can costs go down any further?
Kevin Crutchfield, chairman and CEO, said during the conference call, “In terms of additional big cost leverage, we don’t have anything of the scale that we’ve announced previously.” This shows that costs may have bottomed out. In fact, with miners’ holidays coming up in 3Q, costs may rise marginally.
So did the higher margin per ton help the company curtail losses?
Why cost savings helped Alpha Natural Resources’ 2Q14 earnings
Lower adjusted EBITDA due to lower tonnage
Alpha Natural Resources (ANR) reported adjusted earnings before interest, taxes, depreciation, and amortization (or adjusted EBITDA) of $75.7 million for 2Q2014. During the same period last year, the company had reported adjusted EBITDA of $97.6 million. While the company’s margins per ton improved, the lower tonnage resulted in lower revenues and, in turn, lower adjusted EBITDA
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The bottom line
The company reported net losses of $512.6 million for 2Q2014 compared to net losses of $185.7 for 2Q2013. The difference was largely due to $308.7 million in non-cash goodwill impairment expenses. The company impaired goodwill on the balance sheet at its Eastern operations due to loss of value.
On a per-share basis, the net losses came in at $2.32 for 2Q2014 compared to $0.84 for 2Q2013. Other major coal producers (XME)—like Peabody Energy (BTU), Walter Energy (WLT), and Arch Coal (ACI)—have also posted net losses during the quarter.
The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers. To read about Walter Energy’s 2Q2014 earnings, read the Market Realist series Being a pure play met coal producer isn’t good for Walter Energy.
The cash burn continues
While Alpha Natural Resources (ANR) exhibited stellar cost performance during the quarter, its free cash flows came in at -$260 compared to free cash burn of $60.7 million in 2Q2013. Two major uses of cash were a legal settlement (net of insurance receipts) of $195 million and capital expenditure (or capex) of $43 million.
If Alpha is still burning cash, where is it funding its losses from?
How is Alpha Natural Resources funding its losses?
Sources and uses of funds
As you saw in the previous part of this series, Alpha Natural Resources (ANR) has burnt $260 million during the quarter despite stellar cost performance. The company has been burning cash for some quarters now due to the unfavorable industry environment. In this environment, there are only two options left for the company. One is to sell assets and the other is to raise additional debt.
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In December 2013, the company sold its stake in its Marcellus Shale joint venture to its partner, Rice Energy (RICE), for $100 million in cash and $200 million in Rice Energy shares. As the lockup period ended on July 22, the company is contemplating the sale of its Rice Energy’s shares. The shares are worth an estimated $290 million. The company still has 10,000 acres of space in the Marcellus Shale that it has yet to explore.
The company issued $500 million in senior secured notes maturing in August 2020 during the quarter. The majority of the proceeds were used to fund losses and towards meeting working capital requirements. The company also incurred capex of $43 million during the quarter.
The company used $149 million of the proceeds to boost cash and cash equivalents to $768.5 million. As of June 30, the company had total liquidity of $2.4 billion, including marketable securities of $600 million and unused bank lines of $967 million in addition to available cash and cash equivalents.
With mounting losses, major coal producers (XME) like Peabody Energy (BTU) and Walter Energy (WLT) are building liquidity to stay solvent, hoping for coal prices to pick up.
Alpha saved costs but continued to take losses. How did the market react to Alpha’s performance?
Why Alpha Natural Resources gained despite its Q2 2014 losses
Exceeding expectations
Alpha Natural Resources’ (ANR) share rallied 8.2% on August 6, when it announced the 2Q2014 results. The results surpassed analyst expectations on almost all counts.
Sales came in at $1.05 billion against expectations of $1.03 billion. The adjusted net loss came in at $123.4 million—lower than the expected loss of $178.6 million. The adjusted loss per share came in at $0.56 against expectations of -$0.742.
The company surpassed expectations primarily because of the stellar cost performance in the Appalachian.
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Peabody Energy (BTU) was up 1.22%, Arch Coal (ACI) was up 2.25%, and Cloud Peak Energy was up 1.48% on August 6.
What are analysts saying about the company?
JP Morgan (JPM) reaffirmed its “Neutral” rating on Alpha, with a price target of $5 (a 29% premium over the current price of $3.87). Brean Capital also maintained its “Hold” rating but issued a lower price target at $3.35.
Analysts acknowledge the cost reduction efforts the company has taken during the quarter for bringing Eastern costs to a multi-year low of $62 a ton.
Management’s take
Management seems to be cautiously optimistic about the met coal business and expects prices to at least stabilize at the start of 2015. While production cuts to the tune of 20 million tons are announced globally, management says that another 5 million to 10 million tons of cuts are required to arrest the fall in met coal prices.
Management has acknowledged challenges on the thermal coal front. Most prominent of these challenged is the threat from low natural gas prices and regulatory issues surrounding coal. The PRB rail issue isn’t expected to change materially before the start of 2015.
Moreover, coal stocks at utilities are running low. But there seems to be no hurry to fill stocks. To learn more about challenges facing the U.S. coal industry (XME), read the Market Realist series Must-know: Why coal producers’ stocks are declining.
Alpha Natural Resources’ guidance for the rest of 2014
2014 guidance
Alpha Natural Resources (ANR) revised its guidance downward. It now expects to sell 75 million to 80 million tons of coal in full-year 2014. The guidance includes:
15 million to 18 million tons of met coal
34 million to 37 million tons of Western steam coal
26 million to 30 million tons of Eastern steam coal
Notably, the guidance for the Western steam coal is down from an earlier 37 million to 40 million tons due to ongoing troubles with PRB rail connectivity.
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As you saw earlier in this series, the company expects costs to go up marginally during the third quarter due to miners’ holidays.
A look into the future
The coal industry (XME) isn’t having a good time. To make matters worse, met coal producers have greater difficulty due to oversupply in the market and rising production levels in Australia. The SPDR S&P Metals & Mining ETF (XME) invests in metal and mining companies, including coal producers.
Management has maintained a cautious tone in its guidance, acknowledging the issues facing the company and the industry. The company has started taking steps to survive through the difficult time. It has built large liquidity of around $2.8 billion to stay afloat while cash burn continues. The company has worked hard during the quarter to save costs, resulting in lower-than-expected losses.
All these efforts have put the company in a better position to survive the downturn than it was a couple of quarters back, when analysts questioned the company’s future.
However, the path isn’t easy. The company has $3.9 billion debt piling over it. As the company’s still burning cash, the debt load may remain for a long time. This could result in continued large outgoing interest. So a marginal improvement in coal prices may not help the company come out of trouble. Plus, the costs may not go down any further.
So the short-to-medium-term outlook for Alpha looks grim. But if met coal producers across the globe act sensibly to curb the oversupply, the whole industry will benefit from rising prices.
pipoapipo
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vale, re-leyendo quizas tengas tu mas razon yo en lo q dijo banana (ausencia de platita leoncia a dia de hoy)
gracias por corregirme
aun asi, sigo creyendo q el 10600 es muy probable q se vea en los proximos dias (aunq sea solo por inercia y con 4 duros de volumen)
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El nivel clave a superar (segùn yo lo veo) es el 10.485.
Un indicio de que quiere subir sería el cierre (hoy) por encima de 10.390 (pero, sinceramente, lo veo difícil, aunque no imposible dado que los futuros americanos vienen verdecitos...).
Supongo que ahora le pegarán un tirón hacia arriba -más todavía- o si no, en cuanto abran los americanos...