Walter Energy (WLT) Sees Flat Q1 Coal Sales, Lower Selling Prices; Production to Increase

March 26, 2012 9:02 AM EDT
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Walter Energy, Inc. (NYSE: WLT) has provided an outlook on first quarter performance and reaffirmed full-year metallurgical coal production guidance.

Production Outlook

Walter Energy expects met coal production in the range of 2.8 million to 2.9 million metric tons (MMTs) for the first quarter of 2012, up 16% to 21% from 2.4 million MMTs in the fourth quarter of 2011. Walter Energy continues to expect 2012 full-year met coal production between 11.5 MMTs and 13 MMTs, with approximately 75% of annual production being high-margin hard coking coal (HCC) and 25% pulverized coal injection (PCI).

To support margins, beginning in the second quarter 2012 Walter Energy will decrease production from its lower-margin Maple underground coal mine in West Virginia by approximately 35% due to market conditions for Maple's production. The reduction will be offset in part by increased output of higher-margin HCC from Alabama and Canada.

The Maple underground coal mine produces about 60,000 metric tons (MTs) of high-volatile (vol) met coal each month and has about 230 employees, most of whom will remain with Walter Energy at Maple and other locations. The production decrease will effectively idle the Maple mine for approximately 10 days per month. Walter Energy will continue to monitor market demand for high-vol products and may further adjust production to reflect market conditions.

Sales Volume and Price Outlook

First quarter 2012 met coal sales volume will likely remain unchanged from the fourth quarter last year at 2.4 MMTs. Walter Energy expects approximately 240,000 MTs of first quarter 2012 production to be shipped to customers early in the second quarter due to shipload scheduling and customer preference.

Reflecting current trends in global coal markets, Walter Energy's met coal prices for the first quarter of 2012 will likely average about $220 per MT for HCC and $180 per MT for low-vol PCI. That represents a decline of approximately 10% for HCC and approximately 15% for low-vol PCI coal from the fourth quarter of last year, inclusive of the impact of carryover tons from past quarters.

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