Coal miner Peabody Energy Corp's BTU.N profit raced past analysts' estimates as cost cuts started to pay off and sales volumes in Australia climbed on a pick-up in demand from China, sending its shares up as much as 14 percent.
Record shipments in Australia offset rising production costs during the third quarter, Peabody said. The company is looking to fund projects that are nearing completion rather investing in new ones, aiming at increasing volumes even as prices fall.
"While the global coal environment remains challenged, there are indications that markets are stabilizing through U.S. gas-to-coal switching, higher European coal-fueled generation and increased China infrastructure spending," Chief Executive Gregory Boyce said.
Low prices, weak demand and high-cost Australian operations have forced coal producers to cut costs this year. Prices have fallen about 20 percent in the first half of this year.
Peabody shut a mine in Indiana last month, joining companies such as Alpha Natural Resources Inc ANR.N, Walter Energy Inc WLT.N and Consol Energy Inc (CNX.N) in cutting production.
Peabody said on Monday it would save about $100 million primarily through workforce reductions.
The company raised the lower-end of its full-year sales forecast by 10 million tons. Total sales for 2012 are expected to be between 240 million and 250 million tons.
Australian shipments rose 39 percent to 8.5 million tons during the quarter. The company is targeting Australian sales of between 31 million and 33 million tons in 2012. It had sales of 25 million tons in 2011.
Peabody expects full-year adjusted profit of $2.10 to $2.30 per share. Analysts on average were expecting earnings of $1.78 per share, according to Thomson Reuters I/B/E/S.
Income from continuing operations fell to $122.9 million, or 46 cents per share, from $291.2 million, or $1.04 per share. Adjusted profit was 51 cents per share, much higher than analysts expectations of 33 cents.
Revenue rose 6 percent to $2.1 billion, topping average analysts' expectation of $1.97 billion.
Shares of the company were up 12 percent at $29.13 on Monday on the New York Stock Exchange.
(Reporting By Steve James in New York and Swetha Gopinath in Bangalore; Editing by Don Sebastian and Saumyadeb Chakrabarty)