ICO International Coal Grp.

Coal producer Patriot Coal Corporation (PCX) posted a loss of 42 cents per share for the fourth quarter 2011 compared with earning of 8 cents per share in the year-ago quarter. The loss was significantly wider than the Zacks Consensus Estimate of a loss of 27 cents per share.

In 2011, Patriot reported a loss of $1.26 per share versus a loss of 53 cents per share reported in 2010. However, the result of the company was better than the Zacks Consensus Estimate of a loss of $1.51 per share by 25 cents. 

Top Line Scenario

Patriot’s revenue for fourth quarter 2011 was $603.9 million, up 14.3% from $528.2 million in the prior-year quarter. This was driven by higher selling prices. The company’s quarterly revenue was below the Zacks Consensus Estimate of $642 million.

Of the fourth quarter revenues, around $523.9 million came from the Appalachia Mining Operations, $75.9 million from the Illinois Basin Mining Operations and $4.1 million from Other Appalachia Operations, representing contributions of 86.8%, 12.5% and 0.7%, respectively.

The company’s total revenue for 2011 was $2,402.5 million versus $2,035.1 million reported in the prior fiscal year, reflecting a growth of 18.1%. The rise in revenue was due to higher selling prices. Fiscal year 2011 revenue, however, fell short of the Zacks Consensus Estimate of $2,446 million.

In 2011, the Appalachia Mining Operations contributed $2,066.7 million; $311.6 million were generated from the Illinois Basin Mining Operations and $24.2 million from Other Appalachia Operations.

Operating Highlights

Volumes sold by Patriot, in the reported quarter, totaled 7.6 million tons versus 7.7 million tons in fourth quarter 2010. It includes 5.8 million tons of thermal and 1.8 million tons of metallurgical (met) coal. On a segmental basis, Appalachia Mining Operations contributed 5.9 million tons to total company sales while Illinois Basin Mining Operations contributed 1.7 million tons.

In 2011, company’s sales volume was 31.1 million tons versus 30.9 million tons in 2010. This was driven by rise in met coal sales by 0.5 million ton to 7.4 million tons, year over year.

Revenue per ton in the fourth quarter 2011 rose 15.8% to $78.49 from the year-ago quarter, with Appalachia revenues escalating 18.4% to $89.09 per ton and Illinois revenues increasing only 3.7% to $43.09 per ton.

In 2011, company’s revenue per ton was $76.41 versus $65.37 in 2010, driven by 20.7% revenue per ton increase in Appalachia Mining Operations and 2.4% revenue rise from Illinois Basin Mining Operations.

Operating cost per ton rose significantly to $66.55 in the reported quarter, from $55.70 in the year-ago quarter. Earning before interest, tax, depreciation and amortization (EBITDA) in the quarter was $43.1 million versus $42.8 million in fourth quarter 2010, driven by higher average selling prices and offset by higher per-ton costs.

In 2011, company’s operating cost was $64.64 per ton versus $55.49 in 2010. EBITDA in 2011 was $176.7 million, $34.9 million higher than reported EBITDA in 2010.

Financial Performance

Patriot Coal’s liquidity position as of December 31, 2011 was quite sound with cash and cash equivalents of roughly $194.1 million and no borrowings on its revolving credit facility. Company’s available liquidity was $415 million as of December 31, 2011. During fourth quarter 2011, Patriot paid $28 million to purchase the Blue Creek preparation plant and associated infrastructure leasing expenses.

Patriot’s capital expenditure totaled $54.9 million for the fourth quarter. In 2011, company’s capital expenditure was $174.7 million versus $123 million in 2010.

Guidance

Patriot continues to manage its strategies well to further improve performance in 2012 and beyond. As a result, the company is continuously looking to lock in excellent margins by selling its expected met coal production at attractive prices. The company has reviewed the Central Appalachia thermal mine portfolio to identify the reasons behind depressed domestic thermal coal market.

On the thermal side, Patriot continues to benefit from rising prices in the global marketplace, and has sold about 250,000 tons of Appalachian thermal coal for 2012 delivery at an average price of $80 per ton. The company actively sold thermal coal for 2012 delivery to European markets throughout 2011 and targets approximately 7 million tons of thermal exports in 2012.

The company sold more than 3 million tons of met coal for 2012 delivery, out of which three-fourth were Panther-type quality  with an average price of $135 per ton for new met tons booked.

Patriot forecasts sales volume in the range of 27 – 29 million tons in 2012, including met coal sales of 7.0 – 7.8 million tons. In 2012, cost per ton from the Appalachia segment is expected to be in a range of $72 – $78, while Illinois Basin cost should be in the $42 – $46 range.  

Patriot Coal Corporation currently has a Zacks #3 Rank (short-term Hold rating).

Based in St. Louis, Missouri, Patriot Coal is a coal producer and marketer in eastern United States, operating 14 mining complexes in Appalachia and the Illinois Basin. It controls approximately 1.9 billion tons of proven and probable coal reserves. The company primarily competes with International Coal Group Inc. (ICO) and Peabody Energy Corp. (BTU).

 
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