Arch Coal posts $60 million loss; optimistic about future coal demand

Arch Coal (NYSE:ACI) shares dropped nearly 5% on Tuesday as the American miner reported an adjusted net loss of $60 million – $0.29 per diluted share – in its Q2 2013 results.

This compares with a $22.1 million adjusted net loss in Q2 2012, although the $0.29 drop per share is better than analysts' forecasts of $0.33 cents, according to Reuters.

The report includes an adjusted sales forecast of between 7.7 and 8.3 million tonnes of metallurgical coal, a decrease compared to previous estimates of between 8 million to 9 million.

The company has had a rocky first half of the year – booking a $20.5 million write-down over a cancelled clean coal power plant, selling the Utah-based Canyon Fuel Company and suffering a 46% decline in share prices year-to-date.

Arch received nearly half a billion for the Utah sale – part of the company's strategy to increase shareholder value by selling off non-core assets and cutting costs across the board.

By disposing of Canyon, the company expects to save more than $200 million between 2014 and 2017 and $20 million this year.

Despite the net loss, the St. Louis-based miner sold nearly 1 million more tonnes of coal in this quarter than in Q1. The average sale price was also up from $21.66 to $22.34.

The combination of an over-saturated market and depressed prices contributed to the company's losses, the report says.

Excess global supply could be anywhere between 15 and 25 million tonnes, Paul Lang, the firm's CEO, said in a conference call with Reuters.

But the coal miner is not dismayed by these results.

“Arch believes currently depressed metallurgical coal market trends are unsustainable over the long term” the report said.

The company expects crude steel production to increase by 35% over the next eight years, thereby driving up metallurgical coal demand.

With domestic coal use for power generation growing 10% in the first five months of 2013, the company also has high hopes for thermal coal sales.