TORONTO (miningweekly.com) – Extended low-cycle conditions prompted American coal producer Peabody Energy on Tuesday to suspend the quarterly dividend on its common stock, curtail metallurgical coal output and cut jobs as it turned to aggressive cost-cutting measures to survive market headwinds.

Peabody was implementing a series of actions at its operations to increase productivity, decrease costs, improve cash flows and reduce coking coal and low-volatility pulverised coal injection volumes given the negative current market conditions.

"Peabody accelerated a number of initiatives in the second quarter to reduce operating costs, create a leaner organisation and optimise our portfolio. As we manage through extended low-cycle market conditions, Peabody is taking aggressive actions on multiple fronts to preserve and enhance long-term value,” Peabody president and CEO Glenn Kellow said on Tuesday.

Prices for thermal coal used in electricity generation had fallen and remained stubbornly low as utilities switched to cheaper and cleaner natural gas. Prices for metallurgical, or steelmaking, coal had also slumped as a result of weak demand from Chinese steel mills.

As part of the plan to increase liquidity, the board had decided to suspend the company's quarterly dividend and would evaluate whether to reinstate the dividend in the future as circumstances warranted.

The board had also authorised a reverse split of common stock, subject to shareholder approval. Should the share rollback be implemented, the number of authorised, issued and outstanding common shares would be reduced according to an exchange ratio selected by the company, among five alternative ratios between 1-for-8 and 1-for-20, as approved by shareholders.

Further, Peabody would cut its workforce by more than 300 positions across multiple mines in Australia and would lower metallurgical output by about three-million tons a year.

These actions included reducing the annualised metallurgical coal output by 1.5-million tons at the North Goonyella mine, 1.2-million tons at the Coppabella mine and 600 000 t at the Metropolitan mine. The company had lowered its 2015 metallurgical sales target by about one-million tons to reflect the remaining impact of lower output and inventory sales.

Peabody had also started to reduce about 250 corporate and regional positions to create a leaner organisation and lower costs. When fully implemented later this year, these reductions were expected to save $40-million to $45-million a year. These reductions represented about 25% of corporate and regional support positions, and the majority of the reductions occurred in the second quarter. 

Actions also included delayering the organisation and closing offices in Evansville, Indiana, and Gillette, Wyoming. After a 30% reduction in second-quarter selling, general and administrative expenses (SG&A) to the lowest level in eight years, Peabody was targeting more than a 20% improvement in 2015 SG&A.

Peabody had completed about $35-million of noncore asset sales in the US and Australia over the last several months. The company was aggressively reviewing additional portfolio optimisation opportunities and would continue to increase divestment actions in the second half of the year through further sales of noncore reserves, surface lands and other properties.

For the three months ended June 30, Peabody reported a net loss of $1.01-billion, as impairment charges of $900.8-million weighted down the balance sheet. This included a $718.6-million write-down of certain producing and nonproducing Australian metallurgical coal assets, and $182.2 million from US assets held for sale and not affiliated with Peabody's mining segment operations.

Excluding special items, the company reported an adjusted loss per share of $0.65, wider than analyst consensus of an adjusted loss of $0.61 a share.

Revenue fell nearly 24% year-on-year to $1.34-billion.

Peabody’s NSYE-listed stock on Tuesday rallied 14.15% to $1.21 apiece, having shaven 86% off its value since the start of the year.