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Peabody Energy reports 1Q18 earnings

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World Coal,

Peabody Energy has announced its 1Q18 operating results, including revenues of US$1.46 billion, income from continuing operations, net of income taxes of US$208.3 million, net income attributable to common stockholders of US$106.6 million, diluted earnings per share from continuing operations of US$0.83 and Adjusted EBITDA of US$363.9 million.

"Peabody increased volumes, revenues and Adjusted EBITDA over 2017 levels and generated record free cash flow – in addition, today we are announcing the expansion of our share repurchase programme to US$1.0 billion after accelerating our existing US$500 million buyback programme," said Peabody President and CEO Glenn Kellow. "Our results reflect multiple achievements despite not operating at our full potential, as we generated significant cash, sold non-core assets, released cash collateral, simplified the capital structure, initiated a quarterly dividend and accelerated buyback activities."

1Q18 Results

Revenues for the first quarter rose 10% over the prior year to US$1.46 billion driven by improved seaborne coal pricing and increased metallurgical coal volumes. First quarter income from continuing operations, net of income taxes, totaled US$208.3 million, reflecting US$169.6 million of depreciation, depletion and amortisation and US$36.3 million of interest expense. Net income attributable to common stockholders totaled US$106.6 million for the quarter and included a non-cash dividend charge of US$102.5 million related to the conversion of preferred shares during the quarter. All remaining preferred shares converted to common stock as of 31 January 2018.

First quarter Adjusted EBITDA increased 7% over the prior year to US$363.9 million as strong seaborne pricing more than offset the impact of scheduled longwall moves in both Australia and the US; weather effects and temporary geological conditions in Australia; and weaker US pricing.

Australian Adjusted EBITDA increased 23% over the prior year to US$228.0 million as 36% higher metallurgical volumes and sturdy seaborne pricing offset temporary weather and geological conditions. Australian sales volumes totaled 6.8 million t, including 3.0 million t of metallurgical coal sold at an average price of US$153.04/t and 2.1 million t of export thermal coal sold at an average price of US$78.18/t, with the remainder delivered under a long-term domestic contract.

Australian thermal realized pricing increased 10% to US$53.42/t in the first quarter, supported by strong seaborne coal fundamentals despite a larger mix of lower-priced domestic Australian sales. Adjusted EBITDA margins totaled 31% for the Australian thermal segment as robust seaborne pricing mitigated the impacts of 17% lower volumes and higher costs associated with a scheduled longwall move at the Wambo Mine; impacts from weather; and temporary lack of coal availability due to geology at the Wilpinjong Mine.

Australian metallurgical revenues increased 42% to US$466.2 million in the first quarter on strong sales volumes and higher seaborne pricing relative to the prior year. Australian metallurgical costs per t declined 2% from the prior year. However, costs were elevated during the quarter largely due to the completion of a longwall move at the Metropolitan Mine as well as temporary weather-related challenges. Despite these challenges, the metallurgical segment led the company in Adjusted EBITDA margins and contributions, earning 36% Adjusted EBITDA margins and contributing Adjusted EBITDA of US$166.4 million in the first quarter.

First quarter US Adjusted EBITDA totaled US$137.7 million compared to US$191.7 million in the prior year. Lower US margins were driven by a decline in realised pricing as well as increased costs largely due to a longwall move; scheduled repairs and maintenance across the operations; wet weather in the Midwest; and sequencing of overburden removal in the PRB. In addition, 1Q17 Western segment results benefited from a US$13 million contractual settlement with a customer, compared to approximately US$3 million in 1Q18.

Resource Management Adjusted EBITDA increased US$17.9 million from the prior year to US$20.8 million, primarily due to a US$20.6 million gain from the sale of surface lands in Queensland. During the first quarter, Peabody generated positive operating cash flow of US$579.7 million, including the release of US$254.1 million of collateral requirements and cash tax refunds of US$61.2 million. Free cash flow totaled US$573.3 million, the largest contribution on record, including US$53.7 million of capital expenditures and US$35.3 million of Middlemount cash contributions.

For the full press release, including Peabody's 2Q18 expectations, click here.

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