Walter Energy loss climbs in Q2 2014; Canadian mines idled

Walter Energy (NYSE: WLT), a major metallurgical coal producer based in Alabama, on July 31 reported a net loss of $151.4m in the second quarter of 2014, compared with a net loss of $34.5m in the second quarter of 2013.

“Our operations performed well in the second quarter,” said Walt Scheller, Chief Executive Officer. “We controlled costs, reduced inventories, and had solid coal production and sales despite idling our Canadian mines. In addition, we kept tight control over our capital spending as well as selling, general and administrative costs.

“We also improved liquidity and financial flexibility through our recent successful notes offering,” Scheller continued. “I believe we have made great strides in positioning the Company to manage through the current difficult market for met coal.”

Second quarter 2014 consolidated revenues totaled $378.4m, compared with $441.5m in the second quarter of 2013, reflecting a decrease in average met coal selling prices of $36.20 per metric ton (MT), partially offset by an increase of 0.3 million MTs in met coal sales volume. Second quarter results also reflected lower met coal cash cost of sales of $22.34 per ton and a reduction in selling, general and administrative (SG&A) expenses.

In April, the company announced plans to begin idling its mining operations in western Canada, including the Wolverine and Brazion coal mines in British Columbia. The Wolverine mine was placed on idle status in April and the Brazion mining operations (which include the Brule and Willow Creek mines) were placed on idle status in June.

An impairment charge of $23m also was recorded for the estimated loss on sale of the Blue Creek Coal Terminal assets in Alabama, which are classified as assets held for sale.

Second quarter 2014 met coal sales volumes, including both hard coking coal (HCC) and low-vol pulverized coal injection product (PCI), was 2.7 million metric tons (MMTs), representing an increase of 0.3 MMTs compared with the prior-year comparable quarter.

  • HCC sales volume was 2.3 MMTs compared with 2.0 MMTs in 2013. The average selling price for HCC was $114.43 per MT, down from $153.54 per MT in the second quarter of 2013.
  • Low-vol PCI sales volume totaled 0.4 MMTs, down 0.1 MMTs from the prior-year period, at an average selling price of $109.37 per MT compared with $135.55 per MT in 2013.

Met coal cash cost of sales for the second quarter of 2014 averaged $99.70 per MT, down $22.34, or 18.3%, compared with the second quarter of 2013, driven by continued improvement in mining costs.

Met coal production was 2.4 MMTs in the quarter, compared with 2.9 MMTs in the prior-year period, with the decrease primarily resulting from the idling of the Canadian mining operations in the current quarter.

Met coal cash cost of production averaged $72.97 per MT in the quarter, down $5.50 per MT, or 7%, as compared with the prior-year quarter.

The company expects full-year 2014 met coal production to be between 9.0 and 10.0 MMTs and full-year 2014 met coal sales volume to total between 9.5 and 10.5 MMTs, a reduction from the previous outlook of 10.5 to 11.5 MMTs, primarily because the company’s principal coal transportation provider at the Brule mine in Canada ceased operations in June.

Walter Energy is a leading, publicly traded “pure-play” met coal producer for the global steel industry with strategic access to steel producers in Europe, Asia and South America. The company also produces thermal coal, anthracite, metallurgical coke and coalbed methane. Walter Energy employs approximately 2,900 employees, with operations in the United States, Canada and United Kingdom.

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.