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Arch Resources (ARCH - Free Report) provided guidance relating to its coking coal sales volume for third-quarter and full-year 2023. ARCH now expects its coking coal sales volume in the third quarter to be in line with the figure reported in the second quarter of 2023, primarily due to ongoing mining challenges in the first longwall district at its Leer South mine.
Due to correction in third-quarter 2023 coking coal sales volume, the company revised its full-year coking coal sales volume in the range of 8.6-8.9 million tons, down from the previous range of 8.9-9.7 million tons for 2023. Since the announcement, the market has reacted negatively, with shares of Arch Resources losing 3.9% since Oct 2 to close at $148.95.
Other Details for Q3
Arch Resources preliminarily expects adjusted EBITDA for the third quarter of 2023 to be nearly 10% lower than that reported in the second quarter of 2023.
ARCH expects discretionary cash flow – defined as cash flow from operating activities less capital expenditures – for the third quarter of 2023 to be more than half the total of $150.7 million achieved in the second quarter of 2023, which included a working capital reduction of $62.5 million.
Long-term Outlook
Despite the near-term expected decline in coking coal sales volumes, the long-term prospects of its Leer South mine look promising. Arch Resources’ Leer South mine generated nearly $470 million in segment-level adjusted EBITDA since its startup, versus an initial capital investment of around $400 million.
Arch Resources, with its high-quality coking coal production, is expected to benefit from a strengthening coking coal price environment.
What to Look Forward to in Coal Industry?
The annual coal production rate is falling each year due to the energy transition in the utility space, with more ineffective coal units shutting down. Per the U.S. Energy Information Administration (EIA) report, nearly 60 GW of coal-fired generation has retired since the end of 2018, a total reduction of 25%.
Coal has lost its importance as a fuel source, but it is a reliable source of energy and is used to generate electricity when the demand is high.
Despite an expected drop in coal production volumes, coal operators in the United States can benefit from the expected rise in coal export volumes. Its demand is expected to improve due to its economical pricing compared with other energy sources. Coal is still a viable energy option for many crucial industries across the globe. Per EIA, coal export volumes may increase by 14.4% in 2023 to 98.4 MMst and by 6.7% more to 105 MMst in 2024.
The World Steel Association forecasts a rebound in global steel volume production, rising 2.3% in 2023 to touch 1,822.3 Mt and up 1.7% in 2024 to touch 1,854 Mt. Steel production requires a lot of high-quality coal and nearly 70% of global steel production depends on coal. With the continued recovery in steel production, coal exports are expected to pick up and improve in the long run.
Price Performance
Arch Resources shares gained 33.9% in the last three months compared with its industry’s growth of 24.9%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Arch Resources currently has a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Peabody Energy’s 2023 earnings is pinned at $4.95 per share, reflecting 6.9% growth in the past 60 days. Peabody Energy expects its 2023 Seaborne Metallurgical volumes to be in the range of 6.5-7.5 million tons.
The Zacks Consensus Estimate for Warrior Met Coal’s 2023 earnings is pinned at $9.48 per share, reflecting 15.3% growth in the past 60 days. Warrior Met Coal expects its 2023 coal sales volumes to be in the range of 7.1-7.7 million short tons.
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Arch Resources (ARCH) Gives Guidance, Trims Coal Sales Volume
Arch Resources (ARCH - Free Report) provided guidance relating to its coking coal sales volume for third-quarter and full-year 2023. ARCH now expects its coking coal sales volume in the third quarter to be in line with the figure reported in the second quarter of 2023, primarily due to ongoing mining challenges in the first longwall district at its Leer South mine.
Due to correction in third-quarter 2023 coking coal sales volume, the company revised its full-year coking coal sales volume in the range of 8.6-8.9 million tons, down from the previous range of 8.9-9.7 million tons for 2023. Since the announcement, the market has reacted negatively, with shares of Arch Resources losing 3.9% since Oct 2 to close at $148.95.
Other Details for Q3
Arch Resources preliminarily expects adjusted EBITDA for the third quarter of 2023 to be nearly 10% lower than that reported in the second quarter of 2023.
ARCH expects discretionary cash flow – defined as cash flow from operating activities less capital expenditures – for the third quarter of 2023 to be more than half the total of $150.7 million achieved in the second quarter of 2023, which included a working capital reduction of $62.5 million.
Long-term Outlook
Despite the near-term expected decline in coking coal sales volumes, the long-term prospects of its Leer South mine look promising. Arch Resources’ Leer South mine generated nearly $470 million in segment-level adjusted EBITDA since its startup, versus an initial capital investment of around $400 million.
Arch Resources, with its high-quality coking coal production, is expected to benefit from a strengthening coking coal price environment.
What to Look Forward to in Coal Industry?
The annual coal production rate is falling each year due to the energy transition in the utility space, with more ineffective coal units shutting down. Per the U.S. Energy Information Administration (EIA) report, nearly 60 GW of coal-fired generation has retired since the end of 2018, a total reduction of 25%.
Coal has lost its importance as a fuel source, but it is a reliable source of energy and is used to generate electricity when the demand is high.
Despite an expected drop in coal production volumes, coal operators in the United States can benefit from the expected rise in coal export volumes. Its demand is expected to improve due to its economical pricing compared with other energy sources. Coal is still a viable energy option for many crucial industries across the globe. Per EIA, coal export volumes may increase by 14.4% in 2023 to 98.4 MMst and by 6.7% more to 105 MMst in 2024.
The World Steel Association forecasts a rebound in global steel volume production, rising 2.3% in 2023 to touch 1,822.3 Mt and up 1.7% in 2024 to touch 1,854 Mt. Steel production requires a lot of high-quality coal and nearly 70% of global steel production depends on coal. With the continued recovery in steel production, coal exports are expected to pick up and improve in the long run.
Price Performance
Arch Resources shares gained 33.9% in the last three months compared with its industry’s growth of 24.9%.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Arch Resources currently has a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the same industry are Peabody Energy (BTU - Free Report) and Warrior Met Coal (HCC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Peabody Energy’s 2023 earnings is pinned at $4.95 per share, reflecting 6.9% growth in the past 60 days. Peabody Energy expects its 2023 Seaborne Metallurgical volumes to be in the range of 6.5-7.5 million tons.
The Zacks Consensus Estimate for Warrior Met Coal’s 2023 earnings is pinned at $9.48 per share, reflecting 15.3% growth in the past 60 days. Warrior Met Coal expects its 2023 coal sales volumes to be in the range of 7.1-7.7 million short tons.