Peabody reports 2Q21 results

“We are optimistic about the future given strong coal market demand and pricing around the globe as economies continue to recover from the pandemic; our assets are responding to the current market cycle and continue to benefit from cost improvement initiatives,” said Peabody President and CEO, Jim Grech. “The company has taken a disciplined approach focusing on expanding margins, through ongoing operational improvements, cost controls and sales strategies, along with reducing debt, as we progress to position the company to be resilient in all market cycles.”

2Q21 financial results

2Q21 revenues totalled US$723.4 million compared to US$626.7 million in the prior year primarily due to the impact of higher volumes and improved seaborne thermal pricing.

Selling, general and administrative expenses decreased 15% from the prior year to US$21.4 million as a result of the company's ongoing cost reduction efforts.

Depreciation, depletion, and amortisation (DD&A) declined 13% from the prior year to US$77.1 million, primarily due to the impairment at the North Antelope Rochelle Mine recorded in 2Q20.

Interest expense of US$45.4 million increased US$11.1 million over the prior year due to higher borrowing costs and amortisation of debt issuance costs.

Loss from continuing operations, net of income taxes totalled US$23 million compared to US$1.5 billion in the prior year, or US$127.2 million excluding the US$1.4 billion non-cash impairment of the North Antelope Rochelle Mine. Adjusted EBITDA totalled US$122.1 million compared to US$23.4 million in the prior year primarily due to higher realised seaborne thermal pricing, higher US thermal volumes and improved costs across the platform.

Segment performance

During 2Q21, the seaborne thermal segment shipped 4.1 million t with exports of 2 million t at an average realised price of US$73/t and 2.1 million t sold under a long-term domestic contract. Despite a y/y reduction in sales volumes, unfavourable exchange rates, and higher fuel and royalty costs, seaborne thermal segment costs of US$29.61/t were largely in line with the prior year reflecting the continued impact of cost reduction initiatives and product mix. The segment reported 37% adjusted EBITDA margins and adjusted EBITDA of US$71.4 million.

In 2Q21, Wilpinjong shipped 3.3 million t at an average realised price of US$38/t, which included 1.2 million t of export sales at an average realised price of US$63/t and 2.1 million t of domestic sales at an average price of US$22/t. Wilpinjong costs of US$22/t were impacted by unfavourable exchange rates and higher fuel and royalty costs compared to the prior year. Operating cash flow was also impacted by timing of shipments, higher accounts receivable and higher inventory levels. Wilpinjong contributed approximately US$52 million of adjusted EBITDA, completed US$7 million of capital expenditures and had US$102 million of cash and cash equivalents as of 30 June 2021.

The seaborne met segment shipped 1.4 million t at an average realised price of US$85.48/short t in 2Q21, with Metropolitan restarting longwall production late in the quarter. Total segment costs of US$104.24/t decreased 14% compared to the prior year as productivity improvements and increased sales volumes at the CMJV offset the impacts of unfavourable exchange rates, ramp up costs at Metropolitan and Shoal Creek idle costs. Seaborne met costs excluding Shoal Creek were approximately US$95/t, favourable to US$110/t in the prior year primarily due to fleet optimisation and mine sequencing at the CMJV, which lowered costs by more than 20% to US$84/t. The segment reported an adjusted EBITDA loss of US$26.4 million.

The PRB segment shipped 22.5 million t at an average realised price of US$11.06/t. PRB costs per tonne decreased by 2% to US$9.04 as higher fuel cost impact of US$0.37/t was more than offset by 26% higher volumes over the prior year. The segment reported 18% adjusted EBITDA margins and adjusted EBITDA of US$45.5 million.

The other US thermal segment shipped 3.9 million t at an average realised price of US$40.70/t. Cost per tonne decreased 5% from the prior year to US$29.57 due to pit sequencing and timing of longwall moves in the prior year. The segment reported 27% adjusted EBITDA margins and adjusted EBITDA of US$44.3 million.

Outlook

Based on current market conditions, Peabody anticipates the following in 2021:

US thermal operations

• Coal deliveries will remain largely dependent on general economic conditions, weather, natural gas prices, utility inventory levels and rail performance.
• Essentially all projected volumes priced and committed.
• Based on expected production levels and current commodity prices, full year 2021 cost per tonne in the PRB are estimated to be US$9.35 and other US thermal costs are estimated to be US$30.50.

Seaborne thermal operations

• Higher seaborne thermal volumes in the second half as Wilpinjong and the Wambo JV complete development projects and reach projected production run rates.
• Costs per tonne are expected to be US$33.75 due to product mix, higher expected royalties, exchange rates and fuel prices.
• Second half Wilpinjong revenue and costs per tonne are anticipated to be higher than 1H21 as estimated export shipments (with higher realised pricing and higher preparation, transportation and royalty costs as compared to domestic shipments) are anticipated to be a higher proportion of total volumes. Peabody anticipates 3.7 million t of export shipments and 3.6 million t of domestic shipments for the remainder of the year.

Seaborne metallurgical operations

• The CMJV is anticipated to continue to recognise cost and productivity improvements with full year sales volumes at the high end of guidance of 3.5 – 4 million t.
• Metropolitan is expected to ship approximately 0.8 million t in 2H21 as the longwall reaches planned production levels.
• Costs per tonne, excluding Shoal Creek, are expected to be US$93.
• The Shoal Creek prep plant upgrade project remains on schedule with completion expected in mid 3Q21. Negotiations remain ongoing with respect to the expired Shoal Creek labour contract.

Corporate and Other

• SG&A expense guidance has been revised down to US$80 million reflecting further reductions in overhead costs.
• Capital expenditures are now estimated to be US$200 million, a US$25 million reduction from prior guidance, including major project capital of US$100 million.
• Interest expense is now expected to be approximately US$190 million, including US$40 million of non-cash expense, which reflects a US$10 million decrease from prior guidance due to early debt retirements.
• Peabody also anticipates the following cash impacts for the full year 2021:
  • US$60 million related to final reclamation activities.
  • US$30 million related to post-retirement benefits.
  • US$15 million final payment pursuant to settlement with multi-employer pension plan, paid in July.
    

Read the article online at: https://www.worldcoal.com/coal/02082021/peabody-reports-2q21-results/