UPDATE 2-James River Coal Q1 profit beats Street, shares soar

* Q1 EPS $1.03 vs est $0.81

* Q1 rev up 39 pct

* Q1 helped by higher CAPP average sales price

* Says amended existing CAPP utility contract

* Shares up 26 pct (Adds conference call details, analyst's comments, share movement)

By Antonita Madonna Devotta

BANGALORE, May 1 (Reuters) - James River Coal Co's (JRCC.O) quarterly profit beat expectations, boosted by a 73 percent jump in the average price of Central Appalachian coal (CAPP), but said it would cut production due to the softness in coal demand.

The results pushed James River's shares up 26 percent and triggered a rally in coal stocks like Walter Industries Inc (WLT.N), Alpha Natural Resources Inc (ANR.N), International Coal Group Inc (ICO.N) and Foundation Coal Holdings Inc (FCL.N).

The broader Dow Jones coal index .DJUSCL rose 10 percent.

CAPP average sales price rose to $90.91 per ton, compared with $52.56 per ton in the year-ago quarter, driven by new contracts signed by the company in 2008.

For the first quarter, James River swung to a net profit of $28.2 million, or $1.03 a share, compared with a net loss of $16.7 million, or 78 cents a share, a year earlier.

Revenue at the Richmond, Virginia-based coal producer rose 39 percent to $192.1 million.

"In response to the weak coal markets, we are continuing to adjust our production through small changes to our work schedules for the remainder of 2009," Chief Operating Officer C.K. Lane said in a statement.

In a conference call with analysts a company executive said James River cut production on Saturdays, stopped purchase of coal and idled most of its contract mines. It also plans to reduce capital expenditure as part of its cost-savings.

Demand for U.S. coal domestically and in the export market has diminished and prices have fallen as a worldwide economic slowdown has cut demand for electricity, steel and cement -- all of which are produced using coal.

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