* Loss ex-items 19 cents/share vs Street view loss 55 cents
* Production cuts hit revenue but improve unit costs
* Shares jump more than 15 pct on NYSE
By Allison Martell
Feb 14 Alpha Natural Resources Inc, the
top U.S. producer of coal used for making steel, reported a
narrower-than-expected quarterly operating loss on Thursday
thanks to aggressive cost-cutting, sending its shares up more
than 15 percent.
The company, which curbed output last year to control costs
as low prices battered U.S. coal producers, said it may "further
adjust" its operations to reflect industry conditions.
Revenue tumbled in the fourth quarter and the company's
operating loss widened, but the loss was much smaller than
CRT Capital Group analyst Kuni Chen said lower costs helped
Alpha Natural beat estimates, while its cost forecasts were also
better than he had expected.
"The future for a lot of these companies is basically
positioning defensively for as long as possible until the
markets recover," he said. "We think we're going to see more of
that recovery in 2014 and 2015, so you need the cost structure
and the balance sheet flexibility to make it through."
Chen said Alpha's balance sheet looked "well-positioned."
For the fourth quarter, Alpha's net loss narrowed to $128
million, or 58 cents a share, from a loss of $793 million, or
$3.62 a share, a year earlier. Revenue fell to $1.56 billion
from $2.07 billion.
The Bristol, Virginia-based company took a charge of $188
million to write down the value of assets, which it said was
based on conditions in the coal market and lower expected future
production, especially of thermal coal, used in power stations.
Excluding the impairment and restructuring charges and other
special items, Alpha's adjusted loss was 19 cents a share. On
that basis, analysts' average forecast was a loss of 55 cents a
share, according to Thomson Reuters I/B/E/S.
Alpha shares rose 15.4 percent to $9.80 in late-morning
trading on the New York Stock Exchange.
Thermal coal is expected to be 35 percent cheaper than
natural gas this year, according to the U.S. Energy Information
Administration, and that may spark a recovery in consumption,
which dropped to its lowest level in two decades in 2012. But
even if demand improves, high inventories look set to delay
Prices of metallurgical coal, used in making steel, have not
offered much relief, pulled down by weak demand from China, the
world's largest producer and consumer of steel. Alpha Natural
said its realized price per ton slid 23 percent to $121.27 in
the quarter, though recent economic data may point to a gradual
U.S. coal miners have been cutting expenses, and Alpha
Natural is no exception. In September, the company said it would
cut about 1,200 jobs, or 9 percent of its work force, idling
mines in Virginia, West Virginia and Pennsylvania, and reducing
production in the Powder River Basin, a coal-rich region in
eastern Montana and Wyoming.
The company said it expects to ship between 81 million and
92 million tons of coal in 2013, of which 21 to 27 percent is
expected to be metallurgical coal. It shipped 108.8 tons in
2012, and 19 percent of that volume was metallurgical coal.
As with many firms that sell to the steel industry, over the
long term Alpha Natural sees big growth opportunities in
exporting metallurgical coal to emerging economies, where steel
is needed to build infrastructure.
The average cost of coal sales for Alpha Natural's eastern
U.S. operations dropped in the fourth quarter, to $68.55 per ton
from $78.57 a year earlier. Costs edged lower in the west as
Those costs are not sustainable, the company said, but are
expected to rise to just $71 to $75 per ton in the east for