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Alliance Resource Beats, Sales Rise

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Alliance Resource Partners, L.P. (ARLP - Free Report) announced fourth-quarter 2012 operating earnings of $1.87 per unit, up 41.7% from the Zacks Consensus Estimate of $1.32. The results of the partnership were 6 cents lower than the year-ago earnings of $1.93 per unit.

2012 operating earnings of Alliance Resource Partners were $6.12 per unit, down 24.7% from $8.13 per unit reported in 2011.

The year-over-year decline in earnings was mainly due to a 36% increase in depreciation, depletion and amortization expenses and higher general and administrative expenses.

Total Revenue

Total revenues at the end of the fourth quarter were $549.4 million versus $474.6 million in the year-ago period, which reflects an increase of 15.7%.

The partnership generated total revenue of $2,034.3 million in 2012, 10.3% higher than $1,843.6 million reported in 2011.

In 2012, coal sold volumes increased 10.2% year over year to 35.2 million tons. This along with an average realized price of $56.28 per ton in the said period boosted the top-line performance.

Highlights of the Release

Total operating expenses of the partnership during the quarter were $442.7 million, up 15.1% from $384.8 million incurred in the year-ago period. Increasing sales and production volumes led to higher operating expenses.

During the quarter under review the partnership had to temporarily idle its Pontiki mine for maintenance and safety resulting in losses and a charge of $26.6 million in the quarter.

The partnership also hiked its quarterly cash distribution rate to $1.1075 per unit, up 2.1% sequentially from $1.085 and up 11.9% year over year from 99 cents.


Coal production and sales volumes for 2013 are expected in the range of 38.1 to 39.1 million tons, surpassing 2012 levels.

Alliance Resource expects total revenue for 2013 in the range of $2.1 billion to $2.2 billion reflecting an increase of 6.0% to 9.0% from 2012.

The partnership expects average coal realized price for 2013 to be 1% to 3.5% lower per ton from the 2012 number.

EBITA is expected to range between $600 and $650 million in 2013 and net income is expected to come in a band of $300 million to $350 million.

The partnership will continue to invest in 2013 and enhance its coal production capabilities. For this it has allocated a capital expenditure guidance of $370 million to $400 million.

Other Coal Company Releases

Peabody Energy (BTU - Free Report) reported an operating loss of $1.12 per share in the fourth quarter, coming significantly below the Zacks Consensus Estimate of earnings of 26 cents. Alliance Holdings GP, L.P. reported earnings of 88 per unit in the fourth quarter, surpassing the Zacks Consensus Estimate of 80 cents for the quarter.

Our View

Alliance Resource Partners was able to secure coal sales commitments for 30.7 million tons, 23.4 million tons and 18.7 million tons for 2014, 2015 and 2016, respectively. However, the partnership has failed to come up with any agreement in the lucrative metallurgical export markets for 2013, which will have a negative impact on the average realized price per ton of coal.

The partnership currently retains a Zacks Rank #4 (Sell). We currently have a Zacks Rank # 2 (Buy) on Natural Resource Partners LP (NRP - Free Report) , which is yet to release its fourth quarter results.

Based in Tulsa, Okla., Alliance Resource Partners produces and supplies coal to utilities and for industrial usage primarily in the U.S.  The partnership currently operates 11 mining complex and is in the process of constructing a new mine in southern Ind.

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