UPDATE 4-Coal miner Alpha's net plummets, shares tumble
* Q2 EPS 22 cents vs 94 cents
* Revenue $386.2 mln vs $701.8 mln
* Stock closes down 5.1 percent (Adds closing stock prices, ICG earnings)
By Steve James
NEW YORK, July 27 (Reuters) - Coal miner Alpha Natural Resources Inc (ANR.N) said on Monday second-quarter profit dropped more than 75 percent due to lower demand from power producers and steelmakers.
Results fell short of Wall Street expectations, and shares of Alpha, which is in the process of acquiring Foundation Coal Holdings FCL.N, closed down 5.12 percent at $32.44. on the New York Stock Exchange
Although it reported signs that coal demand was rising, especially from steelmakers, Alpha said it was closely managing production levels and that its projected 2009 sales of 22 million tons could be reduced by two to three million tons.
"Alpha should start to see more meaningful earnings leverage from the recovery in global (steelmaking) markets by the fourth quarter and certainly in 2010," Macquarie Capital said in a research note.
"The company's cost performance has been very strong, suggesting strong earnings leverage as volumes and prices recover in 2010."
Second-quarter net income was $15.4 million, or 22 cents per share, down from $67.1 million, or 94 cents per share, a year earlier, the company said.
Alpha Natural Resources is based in Abingdon, Virginia.
Revenue fell to $386.2 million compared with $701.8 million a year ago, said Alpha. The company produces steam, or thermal coal for power generation, and metallurgical, or coking coal for steelmaking.
Analysts, on average, had expected earnings of 39 cents a share and revenue of $446.25 million, according to Reuters Estimates.
Foundation Coal FCL.N reported a second-quarter profit after a loss a year earlier. Net income was $30.7 million, or 67 cents per share, compared with a net loss of $4.4 million, or 10 cents per share, in the 2008 quarter. Its stock closed down 5.24 percent at $34.34.
International Coal Group (ICO.N) posted a second-quarter profit that beat market estimates, sending its shares up 7.14 percent to close at $3.30.
'ENCOURAGING SIGNS'
"The persistence of weak demand conditions greatly reduced metallurgical and thermal coal shipments in the second quarter," Alpha Chairman and Chief Executive Officer Michael Quillen said in a statement.
"While global business conditions certainly aren't anywhere near where they were at this time last year, we have seen encouraging early signs of a turnaround in the steel markets and renewed interest from coal buyers, which had been mostly absent to this point," he said.
Alpha's proposed $1.5 billion acquisition of Foundation Coal is due to be voted on by shareholders on Friday. Alpha made no comment about it on Monday except to say that if shareholders vote in favor of the deal, it is expected to close shortly after the Friday meetings.
Last week, two proxy advisory firms, Glass Lewis and RiskMetrics, backed the deal, which Alpha expects to boost earnings and cash flow in 2010.
The deal has come under fire from Alpha's largest shareholder, Duquesne Capital Management, which says it will vote against it.
The arbitrage spread for the deal, a measure of the difference between a company's share price and the price a buyer is offering, tightened to 2.3 percent on Friday after the proxy advisers reaffirmed their backing.
The spread had been above 5 percent earlier in the week, which indicated some skepticism on the part of investors on whether the deal would close. (Reporting by Steve James; additional reporting by Michael Erman; editing by Gerald E. McCormick and John Wallace)
