Walter Energy loses $471 million in 2014, more than in 2013

Walter Energy (NYSE: WLT), with coal mining operations in Alabama, West Virginia and Canada, on Feb. 17 reported a net loss in 2014 of $470.6 million, compared with a net loss of $359.0 million in 2013.

“We remain focused on improving our operational performance while implementing cost containment measures across our Company,” said Walt Scheller, Chief Executive Officer. “For the full year 2014, we aggressively reduced costs – both in operational and administrative areas – all while improving production efficiency at our mines; opportunistically restructured our balance sheet to enhance liquidity and provide additional financial flexibility; and ensured that our emphasis on safety remained paramount. As 2015 unfolds, we will maintain our focus on improving safety, increasing productivity and reducing costs.”

Included in the company’s financial results for 2014 are non-cash income tax charges and credits, restructuring and asset impairment costs, transportation take-or-pay costs, gains on the early extinguishment of debt and other items. Excluding these items, the adjusted net loss for 2014 was $449.8 million. The adjusted net loss for 2013 totaled $237.3 million.

Walter Energy reported a net loss of $128.1 million in the fourth quarter of 2014 compared with a net loss of $174.3 million in the fourth quarter of 2013. 

Consolidated revenues in the fourth quarter totaled $285.6 million, compared with $472.0 million in the fourth quarter of 2013, reflecting a decrease in average met coal selling prices of $25.19 per metric ton (MT) and a decline in met coal sales of 0.9 million metric tons (MMTs). Fourth quarter results also reflected a reduction in met coal cash cost of sales of $6.15 per ton and a 23% reduction in selling, general and administrative (SG&A) expenses.

Cost of sales in the fourth quarter of 2014 includes costs associated with idling the company’s western Canadian mining operations of $8.5 million, representing idle mine costs of $6.5 million and transportation take-or-pay charges of $2.0 million, and $7.1 million of lower of cost or market charges as a result of changes in estimates, which includes haulage and washing costs associated with inventories at the Canadian operations.

Metallurgical Coal Sales Volume and Pricing

Met coal sales volumes, including both hard coking coal (HCC) and low-volatility (low-vol) pulverized coal injection product (PCI), totaled 2.0 MMTs, compared with 2.9 MMTs in the prior-year comparable quarter. The decline in met coal sales volumes was primarily due to reduced sales of coal from the idled Canadian mining operations.

HCC sales volumes totaled 1.8 MMTs, compared with 2.4 MMTs in 2013. The average selling price for HCC was $109.92 per MT, down from $137.39 per MT in 2013.

Low-vol PCI sales volumes totaled 0.2 MMTs, down 0.4 MMTs from the prior-year comparable quarter. The selling price for low-vol PCI averaged $99.64 per MT, compared with $118.63 per MT in 2013.

Metallurgical Coal Cash Cost of Sales

Met coal cash cost of sales for the quarter averaged $101.37 per MT, an improvement of $6.15 per MT, or 5.7%, compared with 2013. Performance in the quarter was driven primarily by continued reductions in mining costs, partially offset by the impact of higher than expected costs related to longwall moves at the Alabama operations.

Full-year cash cost of sales in the company’s underground Alabama operations averaged $94.92 per MT, slightly better than the previous full-year 2014 target of $96.00 per MT.

Metallurgical Coal Production

Met coal production was 1.8 MMTs in the quarter, compared with 3.2 MMTs in the prior-year period, with the decrease primarily resulting from the idling of the Canadian mining operations. Met coal production in Canada for the prior-year quarter totaled 1.0 MMTs. Production volumes were also lower in the company’s Alabama underground operation due to the unfavorable effect of longwall moves in the current-year-period.

Met coal cash cost of production averaged $72.51 per MT, compared with $68.02 per MT in the prior-year comparable quarter, with the increase in the current-year period primarily the result of increased costs due to longwall moves.

Outlook

The company expects met coal sales to total 8.5 to 9.0 MMTs in 2015. Capital expenditures in 2015 are expected to be in line with 2014, and the company expects to further reduce SG&A expenses by 10%. Cash interest expense is expected to approximate $265 million for the year.

Walter Energy is a leading, publicly traded “pure-play” metallurgical 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 coal bed methane gas. Walter Energy employs approximately 2,700 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.