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Arch equity rises on expanded share buyback plan; 12% higher revenue

31st October 2017

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – The ongoing strength in coking coal pricing, as well as overall strong performances from the Powder River basin and other thermal business segments, have conspired to lift US coal producer Arch Coal's third-quarter revenue 12% quarter-on-quarter.

St Louis, Missouri-based Arch recorded revenues of $613.5-million for the three months ended September, lifting net income to $68.4-million, or $2.83 a diluted share, compared with net income of $37.2-million, or $1.48 a share in the prior quarter.

That compared favourably to a loss of $51.4-million, or $2.41 a share, in the year-earlier period, when the company was undergoing a second reorganisation in the US bankruptcy court, from which it emerged during October 2016.

Adjusted earnings before interest, taxes, depreciation, depletion, amortisation, reorganisation items and early debt extinguishment charges came to $104.3-million, which excluded a $21.6-million gain resulting from completing the sale of the Lone Mountain complex on September 14.

"Arch turned in a solid financial performance during the third quarter, despite substandard rail service in July and August at our coking coal operations, coupled with adverse geologic conditions at our two longwall mines in West Virginia.

"Even with these unexpected challenges, Arch moved forward aggressively with its share repurchase programme, took advantage of ongoing strength in global thermal markets and completed a number of strategic initiatives that strengthened our financial foundation and optimised our operating portfolio. In fact, this past quarter demonstrates the company's ability to generate significant shareholder returns even in a less-than-optimal operating environment," said CEO John Eaves.

The strong performance prompted management to expand the company's share repurchase authorisation by $200-million to $500-million, which helped send its NYSE-listed stock climbing 8.5% on Tuesday to $77.90 a share.

Arch also paid $8.2-million in cash dividends to shareholders during the third quarter, and the board has declared the next quarterly cash dividend payment of $0.35 a common share, scheduled to be paid on December 15, to stockholders of record at the close of business on November 30.

Arch has lowered its coking coal sales volume guidance for the year, now expecting to sell between 6.6-million tons and 6.8-million tons of coking coal in 2017. At the midpoint of its volume guidance level, Arch is now more than 98% committed on coking coal sales for the full year, with 10% of that committed volume exposed to index-based pricing.

Further, given strong demand fundamentals for US thermal coal globally, Arch has raised its thermal coal sales guidance to reflect increased shipments from the company's other thermal segment. Arch now expects to sell between 90-million tons and 96-million tons of thermal coal in 2017. At the midpoint of guidance, Arch's thermal sales are 99% committed for full year 2017.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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