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Peabody announces billion dollar quarterly loss

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World Coal,

Peabody Energy, the largest private-sector coal mining company in world, announced a loss from continuous operations of US$1.01 billion in 2Q15 on the back of a US$900.8 million writedown on its Australian metallurgical coal operations and US assets held for sale.

“In the second quarter, seaborne and US coal pricing declined, reflecting slower global economic growth, declining steel demand and weak US natural gas prices,” the company said in its earnings release, hitting company revenues by US$420 million. Adverse weather conditions in the Powder River Basin (PRB) also cost the company almost US$40 million as volumes from the PRB dropped by about 5.5 million t.

The writedown of the company’s Australian assets totaled US$718.6 million, while a US$182.2 million impairment charge was recorded on US assets held for sale. Despite this, Australian earnings were up to US$55.8 million from US$50.5 million in 2014 as US$160 in cost improvements compensated for US$90 million in lower prices.

Looking forward and the company expects US thermal coal demand to decline by 90 – 100 million short t in 2015 with coal forecast to make up about 35% of the US energy mix. Exports are also expected to drop by 30 – 35 million short t. In responses, US coal supply decreased by 13% in the quarter with further tightening expected in 2H15.

In the medium term, the company looks set to focus on its PRB and Illinois Basin assets, which it expects to overcome 2015 declines by 2017 as these regions “retain a fundamental delivered cost advantage other US coal basins”. By 2017, the company expects about 55 GW of coal-fired generation will retire with 250 GW of coal capacity remaining online.

The company also said that its board of directors had authorised a reverse stock split to help boost share prices. The move is subject to shareholder approval but if implemented Peabody shares would be reduced “in accordance with the exchange rate selected by the company, among five alternative ratios between one-for-eight and one-for-twenty as approved by shareholders,” the company said.

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