TECO Coal expects 2012 sales of between 6.0 million and 6.3 million tons at an average selling price across all products of about $96 per ton, said parent TECO Energy (NYSE: TE) in an Aug. 2 earnings statement.
As recently as its May 1 earnings statement for the first quarter, TECO was projecting 2012 TECO Coal sales of between 7 million and 7.3 million tons. In 2011, TECO Coal sold 8.1 million tons of coal.
The lower coal sales for TECO Coal, with operations primarily in eastern Kentucky, are driven by an expectation that the unsold tons included in the previous sales forecast will not be sold. All of the expected 2012 sales are under contract.
The selling price will average more than $97 per ton over the remainder of the year due to the timing of metallurgical coal shipments in the second half of the year. The 2012 product mix is now expected to be about 45% specialty coal, reflecting lower pulverized coal injection (PCI) coal sales. The cost of production is expected to remain within the previously provided cost range of $83 and $87 per ton as a result of cost-control efforts.
TECO Coal achieved second quarter net income of $12.2m on sales of 1.6 million tons, compared with $15.8m on sales of 2.1 million tons in the same period in 2011. Lower sales volumes in the 2012 quarter reflect the current coal market conditions and the timing of specialty coal shipments.
In 2012, second quarter results reflect an average net per-ton selling price, excluding transportation allowances, of slightly more than $94 per ton, almost 6% higher than in 2011, but below prior guidance due to a sales mix that was more heavily weighted to steam coal in the quarter due to the timing of met coal shipments.
In the second quarter of 2012, the all-in total per-ton cost of production increased to slightly more than $84 per ton, which is below the middle of the cost guidance range previously provided. Compared with the 2011 second quarter, the increased cost of production in the second quarter was driven by spreading fixed costs over fewer tons and higher surface mining costs due to increased diesel fuel usage as a result of trucking coal and overburden further due to the lack of new surface-mine permits. These factors were partially offset by reduced overtime and lower contract miner costs in 2012.
TECO Coal recorded year-to-date net income of $22m on sales of 3.0 million tons in 2012, compared with $24m on sales of 4.1 million tons in the 2011 period. Lower sales volumes in the 2012 year-to-date period reflect the current coal market conditions.
The 2012 year-to-date average net per-ton selling price was $95 per ton, compared with $85 per ton in 2011, and the all-in total per-ton cost of production was almost $86 per ton compared with $78 per ton in 2011. In addition to the same cost factors as the second quarter, the 2012 year-to-date cost of production reflects costs incurred in the first quarter associated with idling a section of a mine and other costs associated with reducing production.
TECO Coal operates primarily in eastern Kentucky, with limited operations in Virginia. Its major operations include Clintwood Elkhorn Mining, Perry County Coal and Premier Elkhorn Coal.