Weak prices hit Peabody earnings

Peabody Energy's earnings in Australia fell sharply in the June quarter, pressured by weak coal prices and with high operating costs.

Peabody said the global seaborne coal trade was expected to continue to grow this year, reaching a record 1.2 billion tonnes, buoyed by demand growth in China and India as well as countries such as Japan, which has commissioned additional coal-fired power generation. Cutbacks to high-priced output in China had also helped lift global volumes shipped.

"The world's largest producers - China and the US - have reduced production and we expect additional cutbacks in the second half," it said. US exports fell 30 million tonnes in June alone, it said, with further cuts expected as legacy contracts expire.

Earlier this week, Peabody ratchetted up its cost-cutting efforts, announcing a heavy round of lay-offs in Australia. In the June quarter, earnings before interest, tax, depreciation and amortisation from its Australian operations fell to $US112.5 million from $US240.4 million a year earlier, on revenue of $US744.8 million down from $US884.9 million.

Peabody said it had moved aggressively to cut costs, including deferring some capital spending as well as taking over direct mining operations at some of its mines. Overall, capital spending is being cut by around 20 per cent.

Additionally, it is implementing "top coal caving" at its North Goonyella mine in Queensland as well as spending to modernise the Metropolitan mine in NSW.