Peabody Energy posts huge loss on weak coal fundamentals

North Antelope Rochelle mine. (Image courtesy of Peabody Energy .)

US coal miner Peabody Energy (NYSE:BTU), the world’s largest privately owned producer of the fossil fuel, reported on Wednesday a fourth-quarter loss of $289.8 million, a notable reversal of fortunes from a year ago, when it posted a profit.

For the year, the mining firm reported a loss of $211.3 million, or $2.04 per sharer. Revenue was reported as $4.62 billion.

The St. Louis-based company blamed converging issues, including a mild Northern winter, low natural gas prices, as well as trade and import policy uncertainties, for the poor performance.

Peabody was bleak on its outlook for 2020, saying it expected further weakness in the market during the first half of the year.

The world’s largest privately-owned coal producer expects further weakness in the market during the first half of the year

“Peabody Energy is getting hammered by weak coal industry fundamentals and escalating environmental, social and governance (ESG) concerns,” Moody’s lead coal analyst, Benjamin Nelson, said in a note to investors.

The coal miner is taking a “live within our means” approach, which means adopting more conservative financial policies, such as reducing capital spending, suspending dividend and eliminating share repurchases.

For 2020, Peabody has earmarked about $250 million for capital expenditure, 12% lower than last year’s actual capex.

“While these actions will help preserve cash and the company has good liquidity today, we expect EBITDA will be down meaningfully and the company will be challenged to generate positive free cash flow in 2020,” Nelson noted.

The company also inked a deal with activist investor Elliott Management, its largest shareholder, and will appoint several new members to the company’s board.

The announced new board members include Elliott Management’s equity partner Dave Miller, Elliott Management’s portfolio manager Samantha Algaze and coal industry executive Darren Yeates.

Peabody said it would nominate each of the new directors, along with all current directors, for a full one-year term in May at the company’s upcoming annual meeting of shareholders.

“We are convinced that Peabody has significant unrealised potential,” Miller said.

Investors reacted positively to the announcement, sending Peabody’s shares up 25.6% to $9.31. A year ago the stock was trading at $33.68.

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