UPDATE 3-Coal miner Consol's quarterly profit slips
* Q3 earnings 48 cents per share vs Street view 66 cents
* Revenue $1.09 billion v $1.17 billion year earlier
* Stock down 3.9 pct (Updates with production data, CEO comments, outlook)
By Steve James
NEW YORK, Oct 22 (Reuters) - Coal miner Consol Energy Inc's (CNX.N) third-quarter profit fell short of Wall Street expectations on lower production of steam coal for power generation, sending shares down 3.9 percent on Thursday.
Consol, which has cut production by 7 million tons to a full-year 2009 target of 58 million tons, said it was matching production to demand, while power plant customers sit on near record high stockpiles of coal.
"The U.S. economy may have bottomed in the third quarter," President and Chief Executive Officer Brett Harvey said in a statement. "A modest recovery appears likely in the U.S. in 2010.
"This should lead to an increase in demand for energy products from industrial customers, power generators and steel producers," he said.
Later, during a conference call with analysts, Harvey said he viewed 2010 as "a bridge year to a tighter market.
"Delivery of steam coal will be soft as stockpiles are high and that will have a real effect on Central Appalachian production," he said. "But on met (steel-making metallurgical, or coking coal) we see real movement and upside there."
Consol, which also has a natural gas business, produces mainly steam, or thermal coal, while coking coal represents only about five percent of total production.
The Pittsburgh-based company said net earnings were $87.4 million, or 48 cents per share, compared with $90.1 million, or 49 cents per share, a year earlier. Revenue fell to $1.09 billion from $1.17 billion.
Analysts on average were expecting earnings of 66 cents per share and revenue of $1.096 billion, according to Thomson Reuters I/B/E/S.
"It was a little disappointing," said analyst Jeremy Sussman, of Brean Murray Carret & Co. "The biggest issue was they had higher costs than we were anticipating. Also, they are selling some contract coal in 2010 in the low 50's ($50 per ton) which is less than the current forward curve."
Consol shares were down 3.9 percent at $49.08 in midday trading on the New York Stock Exchange.
Consol said it produced 12.9 million tons of thermal coal in the quarter -- down from 13.9 million in the year-earlier quarter. The average realized price per ton rose 24 percent to $58.07, while the cost per ton rose only 5 percent to $47.83.
For metallurgical coal, it produced 600,000 tons -- down from 900,000 tons a year earlier -- all of it from its Buchanan mine in Virginia.
The average realized price per ton of met coal dropped to $97.07 from $117.82 in the year-earlier quarter, while the cost per ton dropped to $60.25 from $61.53.
"Stronger than expected metallurgical coal markets enabled us to produce more met coal than we expected," said Harvey. "Our thermal coal sales, though, have still not shown a meaningful rebound. Our strategy is to match production with customer shipments so as not to build inventory."
Current inventories at coal-fired power generators are near all-time highs, with customers reporting an estimated 60 days of inventory on hand on Oct 1, Consol said.
"The company believes the overhang in thermal inventories is likely to continue into at least the first half of 2010," it said.
"With regard to the economic outlook, our best indicators are our own inventories. We will not overproduce if markets remain weak." (Reporting by Steve James; Editing by Lisa Von Ahn, Derek Caney and Gunna Dickson)
