Massey Energy Reports Fourth Quarter Results, Increases Metallurgical Coal Outlook for 2010
Wednesday, February 3rd, 2010
Massey Energy Company (NYSE: MEE) report net income of $24.4 million or $0.28 per diluted share and EBITDA of $123.3 million for the fourth quarter of 2009. The earnings were generated from produced coal revenue of $498.7 million. By comparison, Massey generated net income of $47.7 million or $0.56 per diluted share and EBITDA of $144.3 million on produced coal revenue of $640.0 million in the fourth quarter of 2008.
Commenting on the Company’s fourth quarter results, Massey’s Chairman and Chief Executive Officer Don Blankenship said, “We were pleased with our control of costs and our positive cash generation during the fourth quarter in spite of very difficult market and operating conditions. We are pleased to have improved our market position, balance sheet and regional reserve position in 2009. We look forward to continued improvement in all of these critical categories in 2010.”
The weak global economy and lower total energy demand from electric utilities and steelmakers weighed on the quarterly sales volumes. In addition, weather, weather-related power outages and disruption of rail and ocean transport significantly impacted Massey’s operations. Produced tons sold in the quarter totaled 7.8 million compared to 10.2 million in the fourth quarter of 2008.
“The shipping delays caused by the remnants of Hurricane Ida as it pounded the east coast of the United States in November were only exacerbated by the heavy snowfalls and extreme low temperatures of December,” Blankenship continued. “The impacts of the adverse weather on mine operations and transportation and regulatory constraints prevented us from reaching our quarterly shipment targets. However, other projections for revenue and costs per ton were within guidance tolerances.”
Massey’s fourth quarter operating cash margin per ton of $14.26 represented a decrease of 1 percent compared to the operating cash margin per ton of $14.42 reported in the fourth quarter of 2008. The lower cash margin resulted as revenue per ton increased by 2 percent but average cash cost per ton increased by 3 percent.
Average produced coal revenue per ton for the fourth quarter of 2009 was $64.13 compared to $62.69 in the fourth quarter of 2008. The improvement was driven by realized price increases for utility and industrial coal and an increase in the proportional mix of metallurgical coal sold during the quarter.
Average cash cost per ton for the fourth quarter was $49.87 compared to $48.27 in the fourth quarter of 2008. The increase was due largely to higher fixed cost absorption on lower total tons sold during the period.
The results for the fourth quarter of 2009 included the impact of a $6.0 million reserve for bad debt. The reserve was booked in other expense.
Metallurgical Coal Capacity to be Increased
As a result of improving conditions in the global metallurgical coal markets, Massey now expects metallurgical coal shipments in the range of 10 to 12 million tons in 2010 compared to the previous estimate of 8 to 10 million tons as stated in the Company’s third quarter conference call with investors on October 28, 2009.
“We are increasingly positive about the strength of the metallurgical coal markets around the world,” said Blankenship. “Our customers are increasing their production plans and our order book for 2010 has increased. We believe the current and forecasted shortage of metallurgical coal makes this the right time to bring on additional production.”
In order to meet increasing customer demands, Massey is ramping up production at 7 metallurgical coal mines. New underground mine sections will be added at Massey’s Mammoth and Inman resource groups with production expected to begin in March 2010. Another section will be added at the Guyandotte resource group with production expected to begin in May 2010. Additionally, production levels have been increased at 3 existing metallurgical coal mines at the Logan County Mine Services resource group and the Elk Run resource group.
Expansion at these 6 mines is in addition to the ongoing development of Massey’s Rowland property where a new resource group is planned. An initial new deep mine is planned to begin production of low volatile coal in the second or third quarter of 2011 at an annualized rate of about 1.0 million tons. Additional mines are planned to be constructed at the Rowland group over the next 18 to 24 months as market conditions warrant. When complete, Massey expects the new resource group to produce approximately 2.0 million tons of low and mid volatile metallurgical coal annually.