Riding strong met coal sales, Walter Energy has solid Q1

Walter Energy (NYSE: WLT) (TSX: WLT), a major metallurgical coal producer out of Alabama and western Canada, said May 2 that its first quarter revenues reached $632m, with operating income of $84m and EBITDA of $144m.

The company also had record quarterly met coal production of 3 million tonnes and met coal sales of 2.4 million tonnes, with a 500,000 tonne build in inventory.

“Our first quarter results reflect sales of 2.4 million metric tons (MMTs) of met coal and were in line with the latest outlook we provided. However, when compared with prior periods, the first quarter reflects reduced profitability,” said Walt Scheller, Walter’s CEO. “First-quarter met coal production of 3 MMTs was better than our outlook for 2.8 to 2.9 MMTs and set a new quarterly record. I am particularly pleased that consolidated cash costs per ton of hard coking coal (HCC) have improved 12 percent when compared with the fourth quarter of 2011. Walter is on target to achieve our production targets while continuing to focus on further cost reductions.”

For the first quarter 2012, revenues reached $632m, up significantly from the $409M reported in the first quarter of 2011, reflecting the acquisition last year of Canada-based Western Coal. Operating income was $84m in the first quarter 2012 and was comprised of $107m from U.S. operations, partially offset by a first-quarter operating loss of $14m in the Canadian and United Kingdom operations and a $9m loss in the other segment. The operating loss in the Canadian and U.K. operations was primarily due to high operating costs.

The consolidated cash cost for HCC decreased 12% to $116 per tonne compared with $132 per tonne in the fourth quarter 2011. In the U.S. operations, the cash cost of HCC decreased 7% to $110 per tonne compared with $119 per tonne in the prior quarter. In the Canadian operations, the cash cost of HCC decreased 14% to $145 per tonne compared with $168 in the prior quarter.

The improvement in cash cost for HCC was partially offset by higher cash costs per tonne for PCI in the first quarter of 2012 compared with the fourth quarter 2011. At the Brule PCI mine in western Canada, the cash cost per tonne was $159 in the first quarter of 2012. Overall PCI cash costs in the first quarter 2012 were affected by low first quarter production at the Willow mine, which resulted from the planned wash plant outage necessary to upgrade its capability to process HCC. The wash plant upgrade was successfully completed during the quarter and will allow for the processing of premium low-vol HCC from the Willow mine going forward.

The average first-quarter 2012 selling price of HCC was $226 per tonne slightly above the $220/tonne price estimated in the company’s first-quarter outlook. However, the HCC selling price was 7% lower than the $244/tonne achieved last quarter, reflecting world market trends. The average first-quarter selling price for PCI was $188/tonne, again above the estimate of $180/tonne in the first-quarter outlook, but 11% lower than the $212/tonne achieved in the fourth quarter of 2011, again reflecting world market trends.

Walter continues to forecast that full-year 2012 met coal production will be between 11.5 million and 13 million tonnes, of which an estimated 75%-80% will be HCC and the remainder will be low-vol PCI.

Walter Energy is the world’s leading, publicly-traded “pure-play” metallurgical coal producer for the global steel industry with strategic access to high-growth steel markets in Asia, South America and Europe. It has mines in: Alabama, including two big longwall operations in the Blue Creek coal seam; Nicholas and Fayette counties, W.Va.; western Canada; and the United Kingdom. It operated only in Alabama prior to the Western Coal purchase.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.