Arch Coal Posts Profit in 4th Quarter From Year-Ago Loss, As Cost-Cutting Offset Weak Demand

Arch Coal Inc. on Friday reported a profit in the fourth quarter compared with a year-ago loss, as cost-cutting and expanded operating margins more than offset weak demand for coal.

The nation’s second-largest coal producer posted a profit of $79.5 million, or 55 cents per share, in the period ending Dec. 31, compared to a loss of $1 million, or a penny per share, during the same period of 2005 when it recorded charges and costs.

Revenue declined to $618.4 million from $619.8 million during the same period in 2005. Analysts expected revenue of $648.8 million.

For the full year, Arch earned $260.6 million, or $1.80 per share, on revenue of $2.500 billion. That compared to earnings of $22.5 million, or 17 cents per share, on revenue of $2.509 billion in 2005.

Analysts polled by Thomson Financial predicted a profit of 39 cents per share for the quarter and $1.66 for the year. But shares of St. Louis-based Arch declined 93 cents, or 3 percent, to $29.70 in late morning trading on the New York Stock Exchange, as the company’s 2007 projection of earnings per share in the range of $1.25 to $2 fell short of Wall Street expectations. Analysts predicted $2.54.

Arch Coal said it reduced costs per ton of coal to $11.62 from $15.99, which led to a margin improvement per ton of $2.46 compared with 13 cents during the same period in 2005.

Mild weather, better-than-expected performance by competing fuels, increased coal production and a rebuild in generator coal stockpile levels all combined to keep coal prices down in 2006, the company said.

“Looking ahead, Arch remains focused on managing our business through the near-term weakness in the U.S. coal markets, while strongly positioning the company to capitalize on expected growth in coal demand later this year and beyond,” said Steven F. Leer, Arch’s chairman and chief executive officer.

Arch sold 33.9 million tons of coal in the fourth quarter, up from 33.5 million tons in the year-ago period. For the full year, Arch sold 127.4 million tons for the year, down from 138.8 million tons in 2005.

The company reduced its production target for 2007, now expecting production of between 130 million and 135 million tons of coal.

Arch operates 12 mining complexes in the U.S. It contributes about 12 percent of America’s coal supply, second only to another St. Louis-based company, Peabody Energy Corp.

Source: AP via biz.yahoo.com