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Arch Coal Inc. reports 4Q16 results

Published by , Digital Assistant Editor
World Coal,

Arch Coal Inc. has reported 4Q16 net income of US$33.4 million. Revenues for the period totaled US$575.7 million on 26.8 million t of coal sales. The company reported adjusted earnings before interest, taxes, depreciation, depletion, amortization and reorganisation items of US$94.5 million.

Arch Coal has successfully completed its financial restructuring and emerged from bankruptcy as a reorganised company on 5 October 2016. As a result, Arch applied fresh start accounting as of 1 October 2016; therefore, its financial statements after September 30 are not comparable to the financial statements prior to that date. Certain non-GAAP comparative analysis is available in the operational results section of this release and in the investor section of

"Arch achieved a strong financial and operational performance in the fourth quarter – our first earnings period following the completion of our successful restructuring," said John W. Eaves, Arch's chief executive officer. "These results demonstrate the positive momentum in our business and the potential we have to elevate our performance still further as the industry continues to evolve. We are confident in our ability to leverage our strong operating portfolio, commercial and logistical expertise and enhanced financial foundation to deliver long-term value for our shareholders."

Arch's operational results

"Our operations turned in a solid cost performance during the fourth quarter of 2016 – with the metallurgical portfolio reinforcing our low-cost position among US metallurgical suppliers," said Lang. "Looking ahead we will continue to focus on maintaining our disciplined approach to cost control, maximizing the value of our diverse product slate and expanding margins in each of our operating segments."

In the Metallurgical segment, the company shipped 1.7 million t of coking coal at an average realised price of US$75.36/t, with the remaining volume consisting of a mix of pulverised coal injection (PCI), thermal and lower quality thermal byproduct coal. Realisations benefited from higher pricing on new coking coal sales and stronger pricing on index-based contracts that shipped during the quarter. During the fourth quarter, segment cash margins expanded more than three-fold compared to the prior quarter, reaching US$12.63/t, with the average sales price increasing US$10.24/t. Stronger pricing on coking and PCI sales helped offset the impact of increased shipments of lower-priced thermal and thermal byproduct coal. Two planned longwall moves in the region contributed to the modest increase in cash costs when compared with the third quarter. Arch believes its metallurgical segment costs are at the very low end of the industry cost curve.

In the Powder River Basin, the company shipped 21.8 million t as stronger natural gas prices contributed to solid demand from power generators. Average sales price per tonne declined 3% versus the third quarter, driven by sales mix between mines. While cash costs in the segment rose due to volume decline, Arch still achieved an exceptional cost performance when compared to historical levels. Looking ahead, costs in the Powder River Basin are expected to normalise in the range of US$10.20 - $US10.70/t as Black Thunder settles into its anticipated new level of production of 70 - 80 million tpy.

In the Other Thermal segment, which now includes the Coal-Mac operation in West Virginia, cash margins reached $12.22/t, driven primarily by solid overall cost performance. Improved pricing on international sales due to West Elk's ability to capitalize on the uptick in Newcastle prices helped offset weaker shipments from the Viper mine, which was hampered by an extended operating outage at its largest customer.

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