Peabody Reports Q4 and 2019 Results
Peabody announced its fourth quarter 2019 operating results, including revenues of USD 1.12 billion; loss from continuing operations, net of income taxes of USD 290.2 million; net loss attributable to common stockholders of USD 289.8 million and Adjusted EBITDA of USD 204.9 million. President and Chief Executive Officer Glenn Kellow said "During the fourth quarter, Peabody made a number of operational improvements in Australia, reduced costs in four of five operating segments, opportunistically repurchased bonds to reduce debt, generated substantial cash from commercial settlements and progressed the regulatory process for the proposed PRB/Colorado joint venture. For 2020, we are targeting improved met coal volumes and costs, lower SG&A and reduced North Goonyella holding costs. Those benefits are expected to partly offset current lower pricing in all segments, lower US thermal volumes, and the loss of some $200 million in contributions from the closing of the Kayenta and Millennium Mines."
The seaborne thermal segment exported 3.3 million tons at an average realized price of USD 64.83 per short ton, with the remainder delivered under a long-term domestic contract in the fourth quarter. For the full year, Peabody's export thermal sales totaled 11.5 million tons with domestic shipments totaling 8.0 million tons. During the quarter, the Wambo complex had improved production, which contributed to strong segment cost performance of $30.68 per short ton and underpinned fourth quarter seaborne thermal margins of 33 percent. In addition, the Wilpinjong Mine had record railings in 2019.
Fourth quarter PRB shipments declined 8 percent from the prior year to 27.6 million tons, reflecting the challenging demand backdrop across the United States. Continued strong cost performance, along with the settlement discussed above, contributed to 23 percent PRB Adjusted EBITDA margins in the fourth quarter. The Midwestern segment cut costs per ton by 10 percent from the prior year to USD 31.61 per ton even as volumes declined 20 percent, following reduced production from less uneconomic mines. Costs improvements reflect higher productivity across several mines as well as favorable mix from ongoing mines.
2020 Outlook Seaborne Thermal Coal - The United Wambo joint venture was formed in the fourth quarter of 2019 following final federal permit approval. Joint production is targeted to begin late in 2020 and allow for optimized mine planning, improved strip ratios, enhanced quality and the potential to extend the life of the open-cut operations beyond 2040. Costs will be temporarily elevated in 2020 as the mine transitions to the joint venture structure. Peabody expects to spend approximately USD 60 million in capital expenditures in 2020 in conjunction with the joint venture. The Wilpinjong Extension Project, which extends the life of one of the lowest-cost thermal coal mines in Australia and offers attractive returns, continues to progress. Capital expenditures associated with the project are expected to total approximately USD 40 million in 2020.
2020 Outlook Seaborne Metallurgical Coal - Peabody is implementing actions to increase metallurgical coal volumes and lower unit costs. 2020 seaborne metallurgical volumes are expected to be approximately 8.3 million tons. Volumes are anticipated to be weighted to the back half of the year as Shoal Creek is expected to return to normal production levels, following a several-week outage in the first half of the year to finalize an upgrade of the main line conveyor system. Following a significant reduction in holding costs, Peabody is commencing a commercial process for its North Goonyella Mine in parallel with the existing and ongoing mine development plan. The process comes in response to substantial expressions of interest in this valuable asset from potential strategic partners and other producers. Commercial outcomes could include a strategic financial partner, joint venture structure or complete sale of North Goonyella. At this time, Peabody is in discussions with the Queensland Mines Inspectorate regarding ventilation and re-entry of Zone B. Based on the success of discussions with QMI and/or progression of the commercial process being launched, Peabody will determine the appropriate level, if any, and timing of capital expenditures.
2020 Outlook US Thermal Coal - Following an extensive review, and in line with the agreed upon timeline, Peabody anticipates a decision from the U.S. Federal Trade Commission regarding the formation of the highly synergistic proposed PRB/Colorado joint venture in the first quarter. In addition, Peabody and Arch are engaged in permitted integration planning for the proposed joint venture. Following the announced closure of the Kayenta Mine and several other mines in the Midwest in 2019, Peabody will consolidate the former Midwestern and Western segments into 'Other US Thermal' for purposes of segment reporting in 2020 and beyond. Committed volume of approximately 20 million tons in 2020 reflects the combined effects of these closures.
Source : Strategic Research Institute