Arch Coal Nearly Triples Profit On Strong Demand, Higher Prices By *DONNA KARDOS* April 21, 2008 10:22 a.m.
*Arch Coal* Inc. nearly tripled its first-quarter net income, driven by the skyrocketing price of coal amid strong growth in the company's central Appalachian and western bituminous operations.
In addition, the coal producer raised its full-year earnings forecast, citing pricing gains and expectations for the coal markets, as Chairman and Chief Executive Steven F. Leer said the company "is strategically prepared to respond to evolving coal market dynamics."
The coal producer posted net income of $81.1 million, or 56 cents a share, up from $28.7 million, or 20 cents a share, a year earlier. Revenue climbed 22% to $699.4 million. The mean estimates of analysts polled by Thomson Financial were for earnings of 46 cents a share on $687 million in revenue. Gross profit margin rose to 26.4% from 21.4%.
The company sold 9.2% more coal than a year earlier, as average sales prices increased 9.7%. Operating margins jumped 57% to $3.32 a ton, driven by expanded margins in the company's central Appalachian and western bituminous operations.
Looking ahead, Arch Coal raised its guidance for full-year earnings of $2.40 to $2.80 a share, up from its February forecast of $2 to $2.50. Analysts' latest expectations were $2.43.
"Our raised guidance range reflects pricing gains in the international and domestic metallurgical coal marketplace, anticipated strong operating performances in our central Appalachian and western bituminous regions as well as continued solid execution in our Powder River Basin operations," Mr. Leer said.
The company confirmed its prior forecast for 2008 sales volume of 135 million to 140 million tons, excluding coal purchased from third parties. Mr. Leer added, "Over the longer-term, Arch is well-positioned to supply affordable, reliable and vital energy to America for decades to come."
Coal, whose price surge has already outrun those of crude oil and natural gas, began generating an even louder buzz in February as a rash of bad weather in China reduced its production globally. The recent run-up in fuel prices means higher costs for consumers and industries heavily dependent on electricity. But surging coal prices have also generally meant good times for miners such as Arch Coal. *Write to* Donna Kardos at donna.kardos@dowjones.com