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Peabody Energy announces results for 1Q15

Published by
World Coal,

Peabody Energy 1Q15 revenue was US$1.54 billion, down from US$1.63 billion on the prior year. It is reported to be due to lower realised pricing and a shift in US production mix toward the southern Powder River Basin.

"In the face of market headwinds, Peabody's first quarter performance demonstrates the underlying strength of our business as ongoing cost improvements largely overcame lower coal prices and the impact of hedging," commented Peabody Energy President and CEO-Elect Glenn Kellow. "While our team has made considerable strides in driving down costs, we know we have further work to do, and we are implementing a wide range of initiatives to provide sustainable results and generate shareholder value."

The 1Q15 revenue led to adjusted EBITDA of US$166 million, declining 6% y/y, and including the impact of US$100 million in lower pricing and the timing of resource management transactions.

US mining adjusted EBITDA increased to US$254.1 million from US$252.6 million the previous year. US costs per t decreased 3% as a result of continued cost containment activities, a greater mix of Western shipments, and the net benefit from lower fuel prices. US Mining revenues of US$965.0 million declined 2% from the prior year due to a greater mix of southern Powder River Basin sales and lower realised pricing in the Midwest.

Australian mining adjusted EBITDA decreased US$26.3 million to US$24.5 million in the first quarter, and includes AUS$67.2 million in higher hedging losses versus the prior year. Prior to hedging, Australian Mining Operations increased US$40.9 million to US$61.9 million. The Australian results also show approximately US$25 million related to temporary overburden sequencing issues at the Coppabella mine, as well as mechanical related delays at the North Goonyella mine, both of which have been resolved.

Australian Mining revenues declined US$63.6 million to US$548.2 million, leading to a 16% decline in revenues per t, partly offset by a 7% increase in shipments. Australian costs per t decreased 12%, signifying sustainable cost reductions, lower fuel prices and the repeal of the carbon tax. Volumes totaled 8.8 million t, including 3.8 million t of metallurgical coal at an average realised price of US$89.14 per t and 3.0 million t of export thermal coal at US$57.64 per t, with the remaining 2.0 million t delivered under domestic thermal contracts.

Peabody is taking supplementary extensive measures on improving areas across four areas of the business:

  • Operational: Maintaining focus on increasing safety and productivity and lowering operating costs. Peabody has reduced its global workforce more than 20% over the last three years.
  • SG&A: Building on the 17% cost improvement in 1Q15, the company is targeting a tighter structure through office closures, process rationalisation and overhead reductions. The company is also implementing a global shared services centre to centralise administrative functions.
  • Financial: In 1Q15, the company amended its credit agreement, refinanced its 2016 Senior Notes and expanded liquidity. Longer term, Peabody intends to use excess proceeds from asset sales, lower fixed obligations and improving coal markets to lower debt.
  • Portfolio: Beginning a heightened emphasis on portfolio optimisation through asset sales and joint ventures, including sales of non-core reserves, surface lands and partial interests in active operations. Peabody is progressing a strategic review of its portfolio of Australian tenements. Peabody has more than 7.5 billion t of coal reserves, including approximately 3 billion t not assigned to active mining operations, along with 500 000 acres of surface lands and other assets that are under evaluation.

Written by Harleigh Hobbs.

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