Why Arch Coal Just Cannot Make Any Money

The company sold 33.1 million tons of coal at an average price per ton of $19.18 at a cash margin per ton of $3.75. In the same quarter a year ago, Arch sold 31.4 million tons at an average price of $20.09 per ton for a cash margin of $1.70 per ton. Total operating costs per ton fell from $21.70 a year ago to $18.55.

Sequentially the company’s sales volume fell from 35.2 million tons, but cash margins improved from $3.36 per ton as the company was able to rein in costs.

COO Paul Lang said:

Despite lower shipment levels in the first quarter of 2015 when compared to the previous quarter, we increased cash margins by more than 20 percent in our Appalachian and Powder River Basin segments. Driven by a strong operating performance, our Appalachian region reported its lowest cost performance in four years, allowing us to lower our annual cost guidance for the region.

In its outlook statement, Arch said it expects thermal coal sales for the year in the range of 120 million to 130 million tons and metallurgical coal sales of 6.0 million to 6.8 million tons. The company has also lowered its cash cost per ton guidance range for its Appalachian coal to a range of $56.75 to $59.75 and maintained its cash cost estimate of $10.50 to $11.00 per ton for its Powder River Basin production.

ALSO READ: Can Coal Miners Meet Even Modest Earnings Expectations?

Consensus estimates from analysts for the second quarter call for a net loss of $0.49 per share on sales of $724.57 million, compared with a year-ago net loss of $0.46 per share on sales of $713.78 million. For the full year, analysts are looking for a net loss of $1.91 per share on sales of $2.87 billion.

Shares were down 3.7% to $1.02 shortly after Tuesday’s opening bell. The stock’s 52-week range is $0.80 to $5.08. Thomson Reuters had a consensus analyst price target of around $1.50 before this report.