Weak prices hit Peabody earnings
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.
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Peabody said weak coal prices and high operating costs pushed Australian earnings down sharply in the June quarter. EBITDA from its Australian operations fell to US$112.5 million from US$240.4 million a year earlier, and revenue dropped to US$744.8 million from US$884.9 million.
Peabody expects the global seaborne coal trade to grow this year and reach a record 1.2 billion tonnes, driven by demand growth in China and India, additional coal-fired power generation in countries such as Japan, and cutbacks to high-priced output in China that have lifted volumes shipped.
Peabody noted that the world's largest producers — China and the US — have reduced production and it expects additional cutbacks in the second half of the year. Those production reductions are part of the dynamics shaping global seaborne coal volumes.
According to Peabody, US coal exports fell by 30 million tonnes in June alone. The company said further cuts are expected as legacy contracts expire, which could continue to influence global supply and shipments.
Peabody has ramped up cost-cutting in Australia, including announcing a heavy round of layoffs, deferring some capital spending, taking over direct mining operations at some mines, and cutting overall capital spending by around 20%.
Peabody said it is cutting capital spending by about 20% overall and has deferred some capital projects as part of its aggressive cost-control program.
Peabody is implementing 'top coal caving' at its North Goonyella mine in Queensland and is spending to modernise the Metropolitan mine in New South Wales. It also said it has taken over direct mining operations at some of its mines.
Based on Peabody's update, everyday investors may want to watch trends in thermal coal prices, global seaborne coal trade volumes (including demand from China, India and Japan), production cut announcements from major producers, US export volumes, and Peabody's cost-cutting measures and capital-spending reductions, all of which were highlighted in the company's June-quarter commentary.
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