UPDATE 2-Arch cuts sales forecast for steel-making coal; shares slide

Tue Apr 22, 2014 10:27am EDT

* First-quarter adj. loss $0.60/share vs est. $0.42/share

* Revenue nearly flat at $736 million

* Cuts met coal shipment outlook to 6.3-7.3 mln tons from 7.5-8.5 mln tons

* Shares down 4 percent (Adds analyst comments, details from statement; updates shares)

By Swetha Gopinath

April 22 (Reuters) - U.S. coal miner Arch Coal Inc said it expects to ship fewer tons of steel-making metallurgical coal this year as prices and demand remain weak, but signaled recovering demand for thermal coal, used in power generation.

Shares of Arch Coal, which also reported a bigger-than-expected loss for the first quarter, were down 4 percent at $4.76 in early trading.

Lower steel demand and excess supplies of metallurgical coal have depressed prices, pushing several companies to shutter mines and cut costs.

"(Met coal shipment outlook) cut is somewhat surprising, given the lower cost profile of Arch Coal's met coal portfolio," Brean Capital analyst Lucas Pipes wrote in a note.

Arch Coal said on Tuesday it would focus on producing met coal from its low-cost assets in Appalachia, where it has eight mines.

The company cut the top end of its 2014 cash cost outlook for its Appalachian operations to $66 per ton from $67 per ton, but maintained the low end at $63.

Arch Coal said it now expects to ship between 6.3 million and 7.3 million tons of met coal in 2014, lower than its prior estimate of 7.5-8.5 million tons.

However, the company expects declining coal stockpiles at U.S. power companies and higher natural gas prices to fuel demand for thermal coal.

U.S. coal stockpiles declined to 118.3 million tons in March and were lower than the five-year average of 174.7 million tons, Brean Capital's Pipes said, citing data from energy consulting firm Energy Venture Analysis.

Abundant shale gas supplies and low prices for natural gas had prompted power producers to switch to natural gas from coal but the trend has reversed recently amid increased power demand after a colder-than-expected winter in the United States.

"Utility thermal coal is a bright spot but rail service issues in the Powder River basin are a limiting factor in 2014," Stifel, Nicolaus & Co analyst Paul Forward wrote in a note.

Rail services disruptions have weighed on Arch Coal's results in the past two quarters.

The company's net loss widened to $124.1 million, or 59 cents per share, in the quarter ended March 31, from $70 million, or 33 cents per share, a year ago.

Adjusted loss was 60 cents per share, bigger than the average analyst estimate of 42 cents per share, according to Thomson Reuters I/B/E/S.

Revenue was nearly flat at $736 million but topped the average analyst estimate of $717.7 million. (Reporting by Swetha Gopinath in Bangalore; Editing by Saumyadeb Chakrabarty and Maju Samuel)

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