Armstrong Energy announces a loss of US$13.324 million in 1Q16, according to its latest quarterly results statement, as revenue slumped by 37% from to US$60.44 million. Coal sales fell 27.6% to 1.424 million.
“There continues to be weakness in the US thermal coal markets, driven by low natural gas prices, increased government regulations, and continuing mild weather,” Armstrong said.
“In addition, utilities are experiencing historically high coal inventory stockpiles as their burn is down and have, therefore, been forced to defer contracted tonnages,” the company continued. Earlier this month, Peabody Energy warned that it expected US coal shipments to fall by 175 million – 210 million short t this year.
Cost of coal sales fell 33.2% on the weaker sales volumes, as well as operating efficiencies related to favourable repair and maintenance costs, lower fuel costs and better mining conditions. The average cost of coal sales per short ton was US$36.99, down from US$40.08 in 1Q15. Average sales price was US$42.44 per short t.
The company also said it expected to further cut production to meet current demand levels. In April, it issued notice to workers at the Parkway mine and associated preparation plant that the mine would be closed. Production is expected to end in 2Q16.
The company remains saddled with significant interest repayments, however. It recorded interest expenses of US$8.108 million over the quarter – hitting the company’s bottom line significantly. In comparison, operating losses were just US$5.321 million.
At the end of the quarter the company reported cash on hand of US$63.1 million with an additional US$15.5 million available under its rolling credit facility. The company expects this to be enough to meet anticipated requirements through 2016 but did warn that further restructuring and CAPEX cuts could be necessary after then, if market conditions did not improve.
In February, Moody’s downgraded Armstrong’s credit rating, noting the “material downside risk over the medium term sue to possible closing of coal plants serviced by the company’s mines in favour of gas-fired generation.”
Edited by Jonathan Rowland.
Read the article online at: https://www.worldcoal.com/coal/13052016/armstrong-energy-reports-1q16-loss-2016-769/