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Coal producer Alpha Natural Resources (ANR - Snapshot Report) reported a loss of 47 cents per share for the first quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 58 cents. The loss per share in the quarter was however wider than the year-ago loss of 27 cents.

GAAP loss during the quarter was 50 cents per share versus a loss of 13 cents per share incurred in the year-ago quarter. The difference between GAAP and operating loss in the reporting quarter was primarily due to impairments and restructuring charges.

Total Revenue

Alpha Natural Resources’ total revenue of $1.33 billion in the first quarter was marginally lower than the Zacks Consensus Estimate of $1.34 billion. The results were also lower than the year-ago figure of $1.93 billion by 31.6%.

The decline in revenue was primarily due to lower average realizations for metallurgical and Eastern steam coal and lower steam coal shipment volumes.

Highlights of the Release

Coal shipment in the first quarter 2013 increased to 5.1 million tons from 4.9 million tons in the prior-year quarter.  However this did not have a positive impact on total revenue as the average per-ton realization of $103.28 in the reported quarter was down 29% from prior-year quarter

Total cost and expenses in first quarter 2013 were $1.5 billion versus $2.0 billion in the prior-year quarter.

Financial Update

Cash and cash equivalents of the company as of Mar 31, 2012 were $610.4 million versus $730.7 million as of Dec 31, 2012.

Long-term debt as of Mar 31, 2013 was $3.27 billion decreasing marginally from $3.29 billion as of Dec 31, 2012.

Cash from operating activities in the first quarter 2013 was $65.4 million versus $166.7 million in the prior-year quarter.

Guidance

The company expects to ship 83 to 93 million tons of coal in 2013, which will include 19 to 22 million tons of Eastern metallurgical coal, 27 to 31 million tons of Eastern steam coal, and 37 to 40 million tons of Western steam coal out of the PRB.

Selling, general and administrative expenses are expected to range from $140 million to $160 million for 2013. Interest expense and depreciation, depletion and amortization expense are forecast in the respective range of $230 million to $240 million and $875 million to $975 million.

Capital expenditure for 2013 is expected to remain in a range of $300 million to $350 million.

Other Company Releases

Peabody Energy Corporation (BTU - Analyst Report) reported an operating loss of 5 cents per share in the first quarter, narrower than the Zacks Consensus Estimate of a pro forma loss of 14 cents per share.

Arch Coal Inc. (ACI - Analyst Report) reported first-quarter 2013 pro forma loss of 34 cents per share, marginally wider than the Zacks Consensus Estimate of a loss of 32 cents.

Walter Energy Inc. (WLT - Analyst Report) reported operating loss per share in the first quarter of 2013 of 64 cents, much narrower than the Zacks Consensus Estimate of a loss of 88 cents.

Our View

The U.S. coal producers continue to feel the brunt of soft demand, not helped either by the lower realized price of coal. This has put margins under severe stress. A likely recovery in the demand for steel in 2013 might act as a catalyst for coal shipments for companies like Alpha Natural Resources.

Chinese steel production is expected to grow 4% to 5% in 2013, which might aid coal shipments. The reduction in U.S. coal inventories to 174 million tons at the end of Mar 2013, from the peak 2012 level of 214 million tons also indicates a gradual recovery in coal demand in the domestic markets.

These are signs indicating a possible revival in the coal market but that is not going to happen soon. Alpha Natural Resources has been working to align its business to meet market challenges through cutting down operating costs and investing in the quality of its operations.  

Based in Abingdon, Va., Alpha Natural Resources Inc was founded in 2002. The company with its subsidiaries engages in the production and selling of steam and metallurgical coal in the United States.  With a market cap of $1.65 billion the company has 12,400 full time employees. Alpha Natural Resources has a Zacks Rank #3 (Hold).

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