JOHANNESBURG (miningweekly.com) - Reflecting a strong operational performance, significant cash generation and debt repayment, NYSE-listed coal miner Peabody on Thursday reported adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of $416.2-million for the fourth quarter ended December 31, its best result in five years.
"A highly successful fourth quarter capped a year of substantial achievement for Peabody, as the company delivered results and generated value," said Peabody CEO Glenn Kellow.
"We have much more progress targeted for 2018," he added, stating that the company now had a strong balance sheet, lower interest expenses, minimal taxes, an ability to liberate restricted cash, a newly initiated dividend, a simplified capital structure and strong cash flows.
Fourth-quarter income from continuing operations, net of income taxes, totalled $378-million, reflecting $178.8-million of depreciation, depletion and amortisation; $83.1-million of gains on disposals (excluded from adjusted Ebitda); net mark-to-market gain on actuarially determined liabilities of $45.2-million; and $35.9-million of interest expenses.
The company's net income tax benefit of $81.6-million includes an estimated benefit resulting from newly enacted tax legislation primarily related to alternative minimum tax credits, which are expected to be refunded in 2019 and beyond.
Net income attributable to common stockholders totalled $317.4-million for the quarter and included $40.9-million of noncash preferred stock dividends, reflecting the impact of 9% voluntary preferred conversions during the quarter and the semi-annual preferred dividend.
Ebitda also included $6.5-million of restructuring charges related to future closure costs for Peabody's Millennium coking coal mine, in Queensland.
Adjusted Ebitda increased by $122.2-million over the prior year, led by increases in Australian revenues and margins. For the full-year, Peabody reported adjusted Ebitda of $1.49-billion, with its Australian and US operations contributing 56% and 44%, respectively.
The full-year adjusted Ebitda for the Australian operations, of $906.7-million, marks the platform's best operating result since 2008.
Fourth-quarter Australian thermal coal realised pricing increased 15% to $55.22/t, driven by strong seaborne demand. The Australian thermal coal segment achieved a robust adjusted Ebitda margin of 38%, despite modestly higher costs primarily related to sales-related royalties.
Peabody's Australian metallurgical coal mines sustained their improved second-half cost profile, resulting in fourth-quarter costs of $78.03/t.
The US operations generated fourth-quarter adjusted Ebitda of $162.1-million and delivered 40.4-million tonnes of coal, in line with the prior year. For the full year, the US platform delivered an average margin of 25%, largely driven by the benefit of a contractual settlement and improved cost performance in the Western segment related to higher volumes from the Twentymile mine, in north-west Colorado and favourable ratio changes at the Kayenta mine, in northern Arizona.
For the year ahead, the company noted that it would "deliberately" pursue its stated financial approach of generating cash, maintaining financial strength, investing wisely and returning cash to shareholders.
It would also continue exploring means to upgrade its metallurgical coal platform, including advancing a new longwall system at the North Goonyella operation, in central Queensland, Australia, that has a secondary benefit of reducing downtime during longwall transitions in 2018 and 2019, and underwriting double-digit yearly metallurgical coal production for the foreseeable future.
Peabody is now targeting 2018 seaborne metallurgical and thermal export volumes in line with the prior year, even as it is ramping down production at Millennium, advancing its North Goonyella longwall move and expecting a greater mix of volumes at the Wilpinjong mine, in New South Wales, delivered under a domestic contract.
In the US, Peabody is targeting modestly lower Powder River Basin volumes based on demand.
Capital spending is expected to increase by $105-million (at the midpoint) driven by $85-million of project spending for Australian life extension projects and the purchase of a new longwall at North Goonyella, and $40-million in lease termination payments.