- Peabody sets quarterly records for revenue, EBITDA, operating profit,
net income and earnings per share
- Second quarter revenues climb 43% to $1.53 billion
- EBITDA grows 65% to $446.6 million with operating profit of $343.8
million
- Income from continuing operations totals $242.6 million, 143% above
last year
- Earnings per share from continuing operations rise 141% to $0.89
- New 2008 EPS target of $2.50 to $3.00; nearly double prior-year
performance
ST. LOUIS, July 23 /PRNewswire-FirstCall/ -- Peabody Energy (NYSE: BTU)
today reported that second quarter income from continuing operations rose 143
percent to a record $242.6 million versus the prior year, with related
earnings per share of $0.89. Revenues for the quarter were also a record at
$1.53 billion on 59.8 million tons sold. EBITDA grew 65 percent over last
year to a new mark of $446.6 million.
"Our investments in recent years have created an outstanding global
platform. We have significant volumes of Australian met and thermal coal and
the largest Powder River Basin and Illinois Basin position in the industry,"
said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. "The
structural changes driving demand much higher than supply, across all coal
markets, look to be very long-lived. We are just beginning to benefit from
the repricing of legacy coal supply contracts at higher levels, which could
drive significant earnings increases for many years to come."
RESULTS FROM CONTINUING OPERATIONS
Second quarter 2008 revenues grew $462.1 million over the prior year, to a
record $1.53 billion on 59.8 million tons. Prior year results included
revenues of $1.07 billion on 57.0 million tons. Increased revenues reflect
both higher shipments and higher prices per ton across all regions.
Peabody increased Australia coal shipments 15 percent over the prior year,
and Australia revenues per ton rose 84 percent reflecting higher pricing on
new contracts, partly offset by carryover volumes at prior-year pricing.
Carryover commitments were primarily shipped early in the second quarter and
were largely completed by quarter's end. In the United States, average
revenues per ton grew 22 percent on higher pricing in all regions.
EBITDA totaled $446.6 million versus $270.9 million in the prior year, a
65 percent improvement. Combined U.S. and Australia mining operations more
than doubled their EBITDA over the prior year. Operations overcame more than
$110 million of EBITDA impacts associated with increased
commodity/maintenance/supply costs, Australian currency effects, severe
Midwestern flooding and two major outages to install new equipment at the
company's largest mine. This was offset by nearly $54 million in revenues
related to recovery of reclamation and retiree healthcare costs under a major
coal supply agreement. Compared with the prior year, EBITDA from Trading and
Brokerage increased 44 percent, while the timing of transactions led to $53
million in lower Resource Management EBITDA.
Strong operational performance resulted in operating profit of $343.8
million, 92 percent above last year. Peabody's tax expense totaled $43.6
million for the quarter. Income from continuing operations totaled $242.6
million with earnings of $0.89 per share, compared with $99.7 million and
$0.37 per share in the comparable prior-year period.
Peabody employees also set a new company record for first-half safety
performance, which included a U.S. incidence rate of just 1.52 per 200,000
hours worked.
GLOBAL COAL MARKETS AND PEABODY'S POSITION
Coal demand continues to outpace supply all over the world. For the fifth
consecutive year, coal has been the fastest-growing fuel globally. More than
75 nations are developing new coal-fueled generation. And the growth of coal
is expected to outpace all other energy forms over the next two decades.
"Globally, coal growth continues to outpace every other fuel and new supplies
have not kept pace with rising demand," said Peabody President and Chief
Commercial Officer Richard A. Navarre. "In the United States, coal is gaining
market share and exports are rising dramatically. Every coal market in the
world has seen significant price increases. And as expected, the Powder River
Basin is moving toward pricing equilibrium with coal from other regions."
INTERNATIONAL
- Global demand outpaces supply; inventories in key nations at critically
low levels
- Australian met and thermal coal prices continue to rise from April
settlements
- Peabody Australia volumes up 12% year to date, while industry
production is down
- Significant leverage with large unpriced met and thermal volumes for
2009 and 2010
Global coal markets serving both steel production and electricity
generation continued to tighten during the quarter, marked by record growing
demand as well as declining inventories.
Seaborne metallurgical coal demand continues to increase, driven by world
steel production that is 6 percent higher than the prior year. Australia
produces 60 percent of the world's seaborne metallurgical coal. Contract
price negotiations for deliveries through next March have been largely
concluded, based on the $300 per metric ton benchmark price for Australia's
high-quality hard coking coal.
Global thermal coal use continues to increase to fuel the growing number
of coal-fueled generating plants. Stockpiles are very low in many nations,
and producers and shippers are running at high capacity levels to try to keep
pace with demand. The industry has priced significant volumes off of the
reference price of $125 per metric ton for Newcastle thermal coal, and strong
demand since the settlements has sent spot prices to $175 to $200 per tonne.
In the second quarter, Peabody priced nearly 11 million tons of Australia
metallurgical and thermal coal through March 2009, based on reference coal
prices. Peabody's unpriced Australian metallurgical coal volumes include 6 to
7 million tons for the last three quarters of 2009 and 10 to 11 million tons
for 2010. Unpriced Australian thermal coal volumes include 6 to 7 million
tons for the last three quarters of 2009 and 12 to 13 million tons for 2010.
Peabody believes tight global supplies and strong demand will continue,
based on a number of factors:
- Australia has begun to recover from flooding in the first quarter, but
ship queues continue to run above expectations. Given the proximity to
the world's strongest coal markets, demand is likely to continue to
outpace rail and port capacity for a number of years despite planned
coal chain expansions. Peabody increased Australian shipments 12
percent in the first half of 2008, even as total industry shipments
were down year-over-year. Peabody has increased its annual Australian
coal sales by more than 20 million tons since the beginning of 2004
through acquisitions and expansions.
- More than 60 coal plants in China have been idled due to coal
inventories of less than three days of supply. China has reduced coal
exports more than 8 percent year to date and the country has delayed
issuance of remaining export licenses. China has also announced plans
to lower or eliminate its coal import tariffs.
- Indonesia exports have declined 2 percent year to date, after years of
double-digit growth, and the average heating value of Indonesian
thermal coal is also decreasing. Indonesia also intends to issue
regulations to increase domestic coal availability to meet significant
new coal-fueled generation under development.
- India expects a dramatic increase in electricity generation. India's
coal minister has announced that 78,000 MW of new coal-fueled
generation is needed by 2012. This represents an additional 265
million tonnes of coal use for India.
- South African exports have declined 8 percent year to date. Europe is
scrambling to secure coal supplies as South Africa exports more coal to
India while retaining coal supplies for domestic use to mitigate
generation shortages. The national electric utility has warned that
the nation could be short 100 million metric tons of coal within the
next decade.
- Russia and Vietnam are taking a number of steps to restrict coal
exports.
Longer term, new coal plants are being developed in every region in the
world including the Middle East. China alone added 96,000 MW of new
coal-fueled plant capacity in 2007 and is expected to add more than 80,000 MW
in 2008. Combined, this equals more than half the installed capacity of the
United States.
United States
- U.S. stockpiles 17% below prior-year levels on domestic and export draw
- Powder River Basin demand growth leading continued stockpile reduction
- Published Powder River Basin forward pricing of more than $20.00 per
ton
- Illinois Basin pricing doubles since beginning of 2008
- Peabody: 90-plus million tons of unpriced Powder River Basin and
Illinois Basin volumes for 2010
The U.S. coal markets continue to benefit from the triple demand drivers
of rising exports, strong steel markets and growing U.S. generation needs.
Coal consumption within the United States has risen an estimated 13
million tons in 2008, and coal exports are up an estimated 10 million tons
year to date. Yet coal production has only increased 5 million tons. As a
result, U.S. generator stockpiles, which are already 17 percent below
prior-year levels on a days-use basis, are being reduced at a rate of 2 to 3
million tons per week. Stockpile reductions are likely to accelerate through
the third quarter, due to seasonal use and growing exports, and are expected
to be below targeted levels by the end of summer.
Peabody believes that Powder River Basin coal consumption has increased 6
percent to 7 percent, while shipments are up less than 2 percent year to date,
suggesting an 11 million ton drawdown of inventories. Powder River Basin coal
demand is driven by interbasin switching and supply opportunities, new plant
demand, direct exports and significant "coal-by-wire" opportunities as
Midwestern plants send coal-fueled electricity into the Northeastern United
States. On the supply side, Peabody estimates that approximately 8 million
tons of industrywide Powder River Basin coal has been lost due to
transportation issues from Midwestern flooding.
Combining U.S. and Australia shipments, Peabody is the leader in seaborne
coal sales among U.S.-based companies with an estimated 30 million tons per
year. Regarding U.S. exports, already in the first half of 2008 the company
has completed transactions totaling 5.9 million tons -- more than double the
combined U.S. export volumes of the past two years. This includes coal from
six different U.S. regions for durations that extend as far as 2011.
Peabody is well-positioned to serve that demand with 150 million tons of
annual Powder River Basin capacity from existing mines, and has additional
capacity through its undeveloped School Creek Mine. Illinois Basin pricing
has also doubled in the last six months, to record levels. Peabody has more
than 30 million tons per year of Illinois Basin capacity from existing mines.
Powder River Basin markets continue to set new records for volume and
pricing. For instance, published prices in 2010 exceed $20.00 per ton and are
nearly double the current spot price.
The company has 35 to 40 million tons of U.S. coal unpriced for 2009, and
90 to 100 million tons for 2010, representing significant leverage in a rising
price environment. More than 90 percent of the company's unpriced U.S.
volumes are in the Powder River Basin and Illinois Basin.
Coal demand growth is expected to continue with the build-out of new
coal-fueled plants, with nearly 30 units under construction and another 11
under late-stage development. Construction of these plants is vital as part
of the nation's energy mix, within a rising electricity price environment
where the nation's top watchdogs are warning that electricity reliability,
supply and price are fast approaching dangerous levels. Peabody estimates
that there are approximately 200 million tons of additional coal demand
represented by current and new coal-fueled plants.
PROJECT UPDATE
Peabody continues to advance a number of projects around the world to
capitalize on its leading reserve base, improve productivity, and expand our
ability to serve high-growth markets. These include:
- Expansion of the Wambo Coal Preparation Facility in New South Wales,
Australia, was completed in June. The North Wambo underground mine was
commissioned in the fourth quarter of 2007 and is ramping up to a 3
million ton-per-year production level, while the Wambo surface mine
produced more than 4 million tons last year.
- Wilpinjong Mine experienced a record quarter for production, as the
Australian mine expands to serve both domestic and seaborne thermal
coal demand.
- Surface construction and dredging continues for the NCIG terminal at
Newcastle, which is expected to come on line in 2010. Peabody is the
second largest owner in the terminal. A feasibility study to expand
capacity from 30 million tonnes per annum to 60 million tonnes is also
under way.
- Site development continues for GreenGen, China's signature climate
change project. Construction is expected to begin in the second half
of 2008 following final governmental approvals, with the first phase on
line in less than two years. Peabody is the only non-Chinese partner
in the coal gasification project, which will ultimately capture carbon
dioxide for use in enhanced oil recovery.
- Peabody's new El Segundo Mine in New Mexico began shipping in June, and
is expected to produce 6 million tons of coal per year to serve rapidly
expanding electricity needs in the Southwest. El Segundo is the fourth
major mine that Peabody has completed in the past year.
- The new $70 million blending and loadout system at the North Antelope
Rochelle Mine was completed ahead of schedule during the second
quarter. The first phase was completed in April, while the second
phase was accelerated to June to match the timing of lower train
throughput due to Midwestern flooding. The conversion allows for
increased throughput and state-of-the-art matching of coal blends with
customer contracts.
- Based on customer demand for long-term supply contracts, Peabody is
completing late-stage evaluations for new mine developments in the
Midwest, using its leading reserve base.
- Peabody has partnered with ConocoPhillips and E.ON U.S. to develop a
drilling program for carbon injection in Western Kentucky. The program
is an important part of a pre-feasibility analysis for a potential
coal-to-gas plant by Peabody and ConocoPhillips.
OUTLOOK
Full-year EBITDA is now targeted to be $1.6 to $1.8 billion, with earnings
per share from continuing operations of $2.50 to $3.00 based on an improved
operating outlook and higher prices on new contracts that are expected to
overcome ongoing commodity cost pressures and challenges to coal chain
logistics. The company is reaffirming production volume targets of 220 to 240
million tons with sales of 240 to 260 million tons, including 22 to 24 million
tons in Australia.
For the third quarter 2008, EBITDA is expected to be in the range of $450
to $550 million with earnings of $0.80 to $1.05 per share. Third quarter
results are expected to reflect the full impact of higher prices for seaborne
metallurgical and thermal coals and improving U.S. shipments.
Peabody Energy is the world's largest private-sector coal company. Its
coal products fuel approximately 10 percent of all U.S. electricity generation
and 2 percent of worldwide electricity.
Certain statements in this press release are forward-looking as defined in
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on numerous assumptions that the company believes are
reasonable, but they are open to a wide range of uncertainties and business
risks that may cause actual results to differ materially from expectations as
of July 23, 2008. These factors are difficult to accurately predict and may
be beyond the company's control. The company does not undertake to update its
forward-looking statements. Factors that could affect the company's results
include, but are not limited to: the outcome of commercial negotiations
involving sales contracts or other transactions; credit and performance risk
associated with customers, suppliers, trading and financial counterparties;
the availability, timing of delivery and cost of key equipment and
commodities; transportation availability, performance and costs including
demurrage; geologic, equipment and operational risks associated with mining;
our ability to replace coal reserves; worldwide economic and political
conditions; labor availability and relations; the effects of mergers,
acquisitions and divestitures; legislative and regulatory developments,
including mercury and carbon dioxide-related limitations; the outcome of
pending or future litigation; coal and power market conditions; impact of
weather on demand, production and transportation; availability and costs of
competing energy resources; risks associated with our Btu Conversion
initiatives; global currency exchange and interest rate fluctuation; wars and
acts of terrorism or sabotage; political risks, including expropriation; and
other risks detailed in the company's reports filed with the Securities and
Exchange Commission (SEC).
This information includes certain non-GAAP financial measures as defined
by SEC regulations. We have included reconciliations of these measures to the
most directly comparable GAAP measures in this release. EBITDA (also called
Adjusted EBITDA) is defined as income from continuing operations before
deducting net interest expense, income taxes, minority interests, asset
retirement obligation expense, and depreciation, depletion and amortization.
EBITDA, which is not calculated identically by all companies, is not a
substitute for operating income, net income and cash flow as determined in
accordance with generally accepted accounting principles. Management uses
EBITDA as a key measure of operating performance and also believes it is a
useful indicator of its ability to meet debt service and capital expenditure
requirements.
CONTACT:
Vic Svec
(314) 342-7768
Condensed Income Statements (Unaudited)
For the Quarters and Six Months Ended June 30, 2008 and 2007
(Dollars in Millions, Except Per Share Data)
Quarter Ended Six Months Ended
June June June June
2008 2007 2008 2007
Tons Sold (In Millions) 59.8 57.0 121.0 112.1
Revenues $1,530.9 $1,068.8 $2,806.9 $2,178.6
Operating Costs and Expenses 1,048.5 823.1 2,062.2 1,669.8
Depreciation, Depletion and
Amortization 93.6 88.5 187.6 170.4
Asset Retirement Obligation
Expense 9.2 3.8 16.0 9.5
Selling and Administrative
Expenses 43.1 32.1 94.0 63.8
Other Operating Income:
Net Gain on Disposal or
Exchange of Assets (3.6) (53.0) (63.0) (54.4)
Income from Equity Affiliates (3.7) (4.3) (6.4) (6.5)
Operating Profit 343.8 178.6 516.5 326.0
Interest Income (2.5) (1.5) (3.6) (4.3)
Interest Expense:
Debt-Related Interest 56.5 56.6 114.5 112.2
Surety Bond and Letter of
Credit Fees 1.1 2.0 2.4 3.9
Income from Continuing Operations
Before Income Taxes and
Minority Interests 288.7 121.5 403.2 214.2
Income Tax Provision 43.6 17.0 87.7 28.1
Minority Interests 2.5 4.8 3.4 4.5
Income from Continuing
Operations 242.6 99.7 312.1 181.6
Income (Loss) from Discontinued
Operations, Net of Tax (9.2) 8.0 (21.5) 14.6
Net Income $233.4 $107.7 $290.6 $196.2
Diluted EPS (1):
Income from Continuing
Operations $0.89 $0.37 $1.15 $0.68
Income from Discontinued
Operations (0.03) 0.03 (0.08) 0.05
Net Income $0.86 $0.40 $1.07 $0.73
EBITDA $446.6 $270.9 $720.1 $505.9
(1) Weighted average diluted shares outstanding were 272.7 million and
268.7 million for the quarters ended June 30, 2008 and 2007,
respectively, and were 272.4 million and 268.5 million for the six
months ended June 30, 2008 and 2007, respectively.
This information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
Supplemental Financial Data (Unaudited)
For the Quarters and Six Months Ended June 30, 2008 and 2007
Quarter Ended Six Months Ended
June June June June
2008 2007 2008 2007
Revenue Summary (Dollars in
Millions)
U.S. Mining Operations $939.1 $751.7 $1,797.4 $1,493.2
Australian Mining Operations 523.5 249.4 823.7 536.4
Trading and Brokerage
Operations 61.3 59.4 171.4 135.7
Other 7.0 8.3 14.4 13.3
Total $1,530.9 $1,068.8 $2,806.9 $2,178.6
Tons Sold (In Millions)
Eastern U.S. Mining Operations 8.0 7.7 15.6 15.5
Western U.S. Mining Operations 39.2 38.4 81.5 76.2
Australian Mining Operations 5.5 4.8 11.0 9.8
Trading and Brokerage
Operations 7.1 6.1 12.9 10.6
Total(1) 59.8 57.0 121.0 112.1
Revenues per Ton - Mining
Operations
Eastern U.S. $36.72 $33.12 $36.00 $33.05
Western U.S.(2) 16.44 12.91 15.16 12.86
Total - U.S. 19.88 16.31 18.51 16.28
Australia 95.01 51.75 74.58 54.70
Operating Costs per Ton - Mining
Operations (3)
Eastern U.S. $32.01 $26.72 $31.46 $26.66
Western U.S. 11.65 9.33 10.97 9.23
Total - U.S. 15.10 12.25 14.26 12.18
Australia 51.32 42.59 52.44 43.82
Gross Margin per Ton - Mining
Operations (3)
Eastern U.S. $4.71 $6.40 $4.54 $6.39
Western U.S. (2) 4.79 3.58 4.19 3.63
Total - U.S. 4.78 4.06 4.25 4.10
Australia 43.69 9.16 22.14 10.88
Operating Profit per Ton $5.75 $3.13 $4.27 $2.91
Dollars in Millions
EBITDA - U.S. Mining Operations $225.7 $186.9 $412.4 $375.8
EBITDA - Australian Mining
Operations 240.8 44.0 244.6 106.6
EBITDA - Trading and Brokerage
Operations 38.1 26.4 129.9 63.0
EBITDA - Resource Management(4) 1.3 54.1 57.4 55.4
Selling and Administrative
Expenses (43.1) (32.1) (94.0) (63.8)
Other Operating Costs, Net(5) (16.2) (8.4) (30.2) (31.1)
EBITDA 446.6 270.9 720.1 505.9
Depreciation, Depletion and
Amortization (93.6) (88.5) (187.6) (170.4)
Asset Retirement Obligation
Expense (9.2) (3.8) (16.0) (9.5)
Operating Profit 343.8 178.6 516.5 326.0
Operating Cash Flow from
Continuing Operations 232.9 67.6 321.0 303.1
Coal Reserve Lease Expenditures 63.6 63.6 123.4 123.4
Capital Expenditures (Excludes
Acquisitions) 50.6 143.5 109.9 261.8
(1) Metallurgical sales totaled 1.9 million tons and 1.7 million tons for
the quarters ended June 30, 2008 and 2007, respectively, and 4.0
million tons and 3.7 million tons for the six months ended June 30,
2008 and 2007, respectively. Total non-U.S. sales were 9.5 million
tons and 7.1 million tons for the quarters ended June 30, 2008 and
2007, respectively, and 17.8 million tons and 14.4 million tons for
the six months ended June 30, 2008 and 2007, respectively.
(2) The favorable effect of the customer settlements on revenues per ton
and gross margin per ton for the quarter and six months ended June 30,
2008 was $1.45 and $0.70, respectively.
(3) Includes revenue-based production taxes and royalties; excludes
depreciation, depletion and amortization; asset retirement obligation
expense; selling and administrative expenses; and certain other costs
related to post-mining activities.
(4) Includes asset sales, property management costs and revenues, and coal
royalty expense.
(5) Includes generation development costs, coalbed methane development
activities, costs associated with post-mining activities, and income
from an equity interest in a Venezuelan joint venture.
This information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
Condensed Balance Sheets
June 30, 2008, March 31, 2008 and December 31, 2007
(Dollars in Millions)
(Unaudited) (Unaudited)
June 30, March 31, December 31,
2008 2008 2007
Cash and Cash Equivalents $74.8 $82.5 $45.3
Receivables 296.0 277.8 256.9
Inventories 296.3 247.6 264.7
Assets from Coal Trading
Activities(1) 1,392.5 556.1 349.8
Deferred Income Taxes 98.6 98.6 98.6
Other Current Assets 456.6 309.2 295.2
Total Current Assets 2,614.8 1,571.8 1,310.5
Net Property, Plant, Equipment
and Mine Development 7,342.5 7,325.9 7,323.9
Investments and Other Assets 531.2 440.5 417.1
Total Assets $10,488.5 $9,338.2 $9,051.5
Current Maturities of Debt $135.9 $227.7 $134.4
Liabilities from Coal Trading
Activities(1) 1,459.9 474.6 301.8
Accounts Payable and Accruals 1,155.2 1,092.1 1,134.0
Total Current Liabilities 2,751.0 1,794.4 1,570.2
Long-Term Debt 3,122.7 3,137.4 3,138.7
Deferred Income Taxes 325.0 351.8 315.6
Other Long-Term Liabilities 1,478.3 1,478.7 1,506.6
Total Liabilities 7,677.0 6,762.3 6,531.1
Minority Interests 4.0 2.0 0.7
Stockholders' Equity 2,807.5 2,573.9 2,519.7
Total Liabilities and
Stockholders' Equity $10,488.5 $9,338.2 $9,051.5
(1) Assets and liabilities from coal trading activities have been
presented on a net counterparty aggregation basis consistent with
accounting guidance effective January 1, 2008. December 31, 2007
amounts have been conformed to this presentation requirement.
This information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
Reconciliation of EBITDA to Income from Continuing Operations (Unaudited)
For the Quarters and Six Months Ended June 30, 2008 and 2007
(Dollars in Millions)
Quarter Ended Six Months Ended
June June June June
2008 2007 2008 2007
EBITDA $446.6 $270.9 $720.1 $505.9
Depreciation, Depletion and
Amortization 93.6 88.5 187.6 170.4
Asset Retirement Obligation
Expense 9.2 3.8 16.0 9.5
Interest Income (2.5) (1.5) (3.6) (4.3)
Interest Expense 57.6 58.6 116.9 116.1
Income Tax Provision 43.6 17.0 87.7 28.1
Minority Interests 2.5 4.8 3.4 4.5
Income from Continuing Operations $242.6 $99.7 $312.1 $181.6
Reconciliation of EBITDA to Income from Continuing Operations - 2008
Targets (Unaudited)
(Dollars in Millions, Except Per Share Data)
Quarter Ended Year Ended
September 30, 2008 December 31, 2008
Targeted Results Targeted Results
Low High Low High
EBITDA $450 $550 $1,600 $1,800
Depreciation, Depletion and
Amortization 95 108 395 415
Asset Retirement Obligation
Expense 8 10 34 36
Interest Income (1) (2) (5) (6)
Interest Expense 59 56 233 223
Income Tax Provision 68 88 252 303
Minority Interests 4 5 8 12
Income from Continuing Operations $217 $285 $683 $817
Diluted Earnings Per Share $0.80 $1.05 $2.50 $3.00
This information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
SOURCE Peabody Energy
CONTACT: Vic Svec of Peabody Energy, +1-314-342-7768
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