Peabody reports 4Q21 operating results

During the quarter, the company generated free cash flow of US$426.6 million and retired an additional US$200 million of senior secured debt, resulting in approximately US$420 million of debt retirements year to date, more than 26% of debt outstanding at the start of the year.

“Our robust 4Q21 results further demonstrate the capability of our diverse mine portfolio which continues to benefit from strong market fundamentals driven by the vital necessity for coal to produce reliable energy and steel to fuel the global economy,” said Peabody President and CEO, Jim Grech. “We continue to experience strong market dynamics, and as a result we have significant forward sales commitments and are adding incremental production capacity to meet market demand for our products, while remaining focused on cost competitiveness.”

4Q21 and FY21 financial results

Revenues totalled US$1264.6 million, including US$149 million of unrealised mark-to-market gains related to forward pricing hedges, compared to US$737.2 million of revenues in the prior year, a 72% increase, reflecting the significant improvements in both seaborne met coal and thermal coal pricing realisations.

Selling, general and administrative expenses decreased 7% from the prior year to US$20.7 million as a result of the company's ongoing cost efficiency efforts.

The company recognised income from equity affiliates of US$70.7 million, compared to a loss from equity affiliates of US$34.4 million in 4Q20, primarily related to its 50% interest in Middlemount. Middlemount realised 58% margins which benefited Peabody's 0.4 million t share of semi-hard/PCI metallurgical coal shipped in the quarter.

Adjusted EBITDA totalled US$444.4 million compared to US$103.2 million in the prior year, a 331% increase, primarily due to higher seaborne margins.

FY21 revenues totalled US$3318.3 million compared to US$2,881.1 million in the prior year primarily due to improved seaborne pricing in 2H20. FY21 income attributable to common stockholders totalled US$360.1 million and adjusted EBITDA totalled US$916.7 million compared to a loss attributable to common stockholders of US$1870.3 million and adjusted EBITDA of US$258.8 million in the prior year.

Segment performance

Seaborne thermal

During 4Q21, the seaborne thermal segment shipped 4.6 million t including 2.7 million export t at an average realided price of US$96/t and 1.9 million t sold under domestic contracts. Tonnes sold for the quarter were negatively impacted by 0.6 million t due to heavy rainfall in the Hunter Valley associated with the La Niña weather pattern and continued COVID related staffing shortages. 4Q21 seaborne thermal segment costs of US$33.45/t increased 24% compared to the prior year, primarily due to 84% higher sales realisations resulting in higher royalties, higher fuel prices and weather-related lower volume. The segment reported adjusted EBITDA margins of nearly 50% and adjusted EBITDA of US$148.8 million, in 4Q21.

In 4Q21, Wilpinjong shipped 3.5 million t at an average realised price of US$48/t, which included 1.6 million t of export sales at an average realised price of US$78/t and 1.9 million domestic t at an average price of US$22. Tonnes sold for the quarter were negatively impacted by approximately 0.4 million t due to the weather and COVID related staffing impacts noted above. Average Wilpinjong costs of US$23.75/t were 25% higher than the prior year due to higher royalties on sales realisations that nearly doubled over prior year, higher fuel prices and weather-related volume impacts. In 4Q21, Wilpinjong contributed approximately US$84.6 million to adjusted EBITDA and completed US$2.1 million of capital expenditures. For the full year, Wilpinjong reported sales of 13.2 million t (5.5 million export t at an average realised price of US$64/t and 7.7 million domestic t at an average price of US$22.50/t), cost per tonne of US$23.25 and had US$206.6 million of cash at 31 December 2021.

Seaborne metallurgical

The seaborne met segment shipped 1.6 million t at an average realised price of US$211/t in 4Q21. Total segment costs of US$105.70/t decreased 1% compared to the prior year despite significant increase in royalties on a more than 150% increase in sales realisations, higher fuel prices and persistent wet weather impacting the Coppabella and Moorvale mines. Segment costs benefited in the quarter from an improved cost structure, sustained productivity improvements at Metropolitan and resumption of longwall production at Shoal Creek. The segment reported 50% adjusted EBITDA margins and adjusted EBITDA of US$169.6 million, in 4Q21.

Powder River Basin

The Powder River Basin (PRB) segment shipped 22.5 million t at an average realised price of US$10.99/t. Tonnes sold for the quarter were negatively impacted by approximately 1 million t due to winter weather and COVID impacts on production and rail performance. PRB costs per tonne increased by 10% to US$10.00/t primarily due to higher fuel costs, lower volumes, and one-time costs for major equipment overhauls, recruitment and training to enable higher expected production in 2022. For 4Q21, the segment reported 9% adjusted EBITDA margins and adjusted EBITDA of US$22.3 million.

Other US$ thermal

The other US thermal segment shipped 4.6 million t at an average realised price of US$42.23/t. Cost per tonne increased 16% from the prior year to US$33.79 due to higher fuel prices and one-time costs associated with equipment and staffing to enable higher expected production in 2022. The segment reported 20% adjusted EBITDA margins and adjusted EBITDA of US$38.6 million, in 4Q21.

Outlook

Peabody notes the following for 2022:

US thermal operations

• US thermal volumes are expected to be higher than prior year as both the PRB and other US thermal segments anticipate higher production to meet customer demand.
• Essentially all base volumes are priced and committed while incremental volumes anticipated in the PRB from ongoing one-time investments in production capacity remain open to spot pricing.
• Cost per tonne is anticipated to increase compared to the prior year as a result of higher royalties and fuel prices, in addition to incremental costs to increase near term production.

Seaborne thermal operations

• Seaborne thermal volumes are expected to be consistent with prior year.
• Robust margins from anticipated strong prices are expected to more than offset higher royalties and fuel prices.

Seaborne metallurgical operations

• Seaborne met volumes are expected to increase substantially resulting from a full year of production at Metropolitan and Shoal Creek, with Shoal Creek ramping up longwall production through the first quarter.
• Robust margins from anticipated strong prices are expected to more than offset higher royalties and fuel prices.

Read the article online at: https://www.worldcoal.com/coal/14022022/peabody-reports-4q21-operating-results/