October 26, 2012 / 12:25 PM / 5 years ago

UPDATE 2-Arch Coal posts surprise profit, shares jump

* Q3 profit of $0.20 vs estimated loss

* Expects 2013 capex of about $350 million

* Shares up as much as 13 percent premarket

Oct 26 (Reuters) - Arch Coal Inc, one of the world’s top five coal producers, surprised Wall Street on Friday with a third-quarter profit as cost cuts paid off, and the company said thermal coal shipments were improving.

Arch Coal shares rose as much as 13 percent premarket.

The company, which supplies thermal coal for power generation and metallurgical coal for making steel, shipped 37.5 million tons of coal in the third quarter, up 19 percent from the second quarter.

“Global coal markets are in the process of correcting, with the domestic thermal market building some momentum while metallurgical markets are bottoming out,” Chief Executive John Eaves said in a statement.

Larger rival Consol Energy Inc said on Thursday U.S. thermal coal markets were bouncing back as natural gas was getting costlier and a normal winter was likely. Peabody Energy Corp’s profit topped estimates last week.

Arch Coal said it was matching production levels to demand, reducing costs and lowering capital spending. Coal miners have been forced to cut production, especially in the high-cost Appalachian region, because of weak prices.

The company expects 2012 thermal coal sales volume of 129 million tons to 135 million tons, slightly above its previous forecast.

Arch Coal expects capital spending of about $350 million for 2013, at least 15 percent below estimated 2012 capital spending of $410 million to $430 million.

“We need another 20 million tonnes of cutbacks in the U.S. to bring supply and demand into balance, with 5 million-10 million of these cutbacks coming from metallurgical coal,” Global Hunter Securities’ metals & mining analyst Atwell Wayne said in a note on Thursday.

Arch Coal’s third-quarter net profit jumped five-fold, while its revenue fell 9 percent. Excluding items, profit was 20 cents per share.

Analysts on average had expected a loss of 16 cents per share on revenue of $1.01 billion, according to Thomson Reuters I/B/E/S.

Shares of St Louis-based Arch Coal have halved in value in the past year, compared with a 27 percent fall in the Thomson Reuters United States Coal Index.

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