Peabody Reports Q2 Earnings of US$1.31 Billion

International coal company Peabody (NYSE:BTU) had a profitable second quarter with earnings topping US$1 billion, the company reported on Tuesday (July 24).

Revenues in Q2 were up four percent year-over-year for the global coal provider. The positive growth was driven by robust margins from Peabody’s Australian platform, which pushed earnings and cashflow higher.

“Peabody’s diversified portfolio continues to generate substantial returns, led by 39 percent margins from the company’s Australian platform, as we capitalize on continued strength in seaborne metallurgical and thermal coal fundamentals,” said Peabody president and CEO, Glenn Kellow.

If the production and demand keep pace, Peabody is on track to surpass last year’s revenues of US$5.6 billion from its 23 operations in the US and Australia.

Demand from China alone, was up 20 percent in June to 19 million tonnes. Thermal coal demand was also up 8 percent due to unseasonable cool temperatures. There was also increased demand in India resulting in a 9-million tonne increase in imports to that country.

“In addition, imports from the Association of Southeast Asian Nations increased compared to the prior year on continued urbanization and general economic growth. Peabody expects this trend to continue as 56 gigawatts of new coal plants in 24 countries worldwide are expected to come online in 2018,” the company said in a statement.

The largest growth was a result of the Australian metallurgical coal segment, bringing in US$417.5 million in revenues, an increase of 45 percent compared to the prior year.

The uptick is likely due to sustained demand for quality metallurgical coal and healthy seaborne pricing levels. Costs per tonne declined US$19.70 per tonne to $US89.37 per tonne as operational performance improved.

The Australian metallurgical segment once again led the company in adjusted earnings before interests, taxes, depreciation and amortization (EBITDA) contributions of US$158.5 million, as adjusted EBITDA margins increased to 38 percent.

During the quarter, Peabody entered into an agreement to sell its Millennium mine’s interest for US$22 million. Peabody expects to collect US$4 million in July upon completion of the sale, with the remaining US$18 million to be received over the subsequent 12 months.

In August 2017, Peabody announced its shareholder return initiative. The program saw the company repurchase nearly US$200 million of common stock in Q2, and an additional US$25 million since June 30, 2018, bringing total share repurchased to US$575 million under its US$1-billion repurchase program.

To date 15.6 million shares have been repurchased under the program, including 5.4 million since March 2018.

“Peabody also freed up all remaining cash collateral, reduced debt and returned US$213 million in cash through buybacks and dividends,” added Kellow. “Peabody continues to generate cash, maintain financial strength and return cash to shareholders as part of a financial approach that is as consistent as it is powerful.”

Moving through Q3, Peabody expects demand to stay on par with Q2 or slightly better. During the current quarter, the company expects to complete the North Goonyella long wall. The project located in Queensland, Australia will produce premium quality, medium-vol, high-strength coking coal with exceptional coking qualities.

Peabody shares remained steady on Tuesday (July 24), sitting at US$43.69 at 12:00 p.m. EST.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.