Walter Energy Forecasts 'Disappointing' Q1 Despite Higher Coal Production

 |  Includes: WLT
by: Proactive Investor

Pure-play metallurgical coal producer Walter Energy (NYSE:WLT) said Monday that first quarter profit and revenue is expected to be "disappointing" due to flat sales volume and weaker coal prices experienced across the industry in the period. However, strong production growth is expected compared to the fourth quarter of 2011.

"We remain confident that production will be within the guidance provided for 2012, and we continue to take steps to optimize production at our highest-margin mines to help offset weakening global metallurgical coal prices," said president and CEO Walt Scheller.

The company expects met coal production in the range of 2.8 to 2.9 million metric tons in the first quarter, up 16 to 21 percent from 2.4 million metric tons in the fourth quarter. Walter Energy continues to expect 2012 full-year met coal production between 11.5 and 13 million metric tons, with around 75 percent of annual production being high-margin hard coking coal (HCC) and 25 percent being pulverized coal injection (PCI).

To support margins, the company said that at the beginning of the second quarter, Walter Energy will decrease production from its lower-margin Maple underground coal mine in West Virginia by approximately 35 percent due to market conditions. The reduction will be offset in part by increased output of higher-margin HCC from Alabama and Canada, the company added.

The Maple underground coal mine produces about 60,000 metric tons of high-volatile (vol) met coal each month and has about 230 employees, most of whom will remain with the company at Maple and other locations, Walter said.

The production decline will effectively idle the Maple mine for around 10 days per month. Walter said it could further adjust production based on market conditions. For the first quarter, met coal sales volume will likely remain unchanged from the fourth quarter last year at 2.4 million metric tons.

Met coal prices during the quarter will likely average about $220 per metric ton for HCC and $180 per metric ton for low-vol PCI, representing a decline of 10 percent for HCC and around 15 percent for low-vol PCI coal from the fourth quarter of last year.

Walter Energy employs around 4,400, with operations in the United States, Canada and United Kingdom. Shares of the company were down 0.65 percent in New York Monday morning, at $62.31.

Disclosure: None.