August 17, 2018 - Alpha Natural Resources (ANR, Inc.), a leading coal supplier in Central Appalachia, reported first half 2018 net income of US$64.6 million, compared with US$23.7 million in the first half of 2017.

Net income from continuing operations was US$63.4 million vs US$58.9 in the first half of 2017. Net income from discontinued operations was US$1.2 million vs a net loss of US$35.2 million in 2017.

Excluding the items described in ‘Reconciliation of Net Income from continuing operations to Adjusted EBITDA’, the first half 2018 Adjusted EBITDA was US$122.1 million compared with Adjusted EBITDA of US$147.9 million in the first half of 2017.

"Although the first quarter proved to be challenging from a logistics and weather perspective, we are pleased with the first six months of 2018," said David Stetson, Chairman and CEO. "We had a strong first half with an average price of US$111.01 for metallurgical coal, US$52.84 for thermal coal, and Alpha is seeing a strong, stable market in the second half of 2018 and into 2019." 

Financial Performance - Continuing Operations

Total revenues in the first half of 2018 were US$606.7 million compared with US$639.0 million in the first half of 2017. The decrease in total revenue was attributable to lower average per ton realisations and fewer brokered tons sold, along with impacts to shipments caused by persistent logistical disruptions in the period. During the first half of 2018, metallurgical coal shipments were 3.7 million t, compared with 3.5 million t in the first half of 2017. Thermal coal shipments were 3.1 million t, compared with 3.1 million t in the year-ago period. Brokered coal shipments were 0.1 million t during the first half of 2018, compared with 0.5 million t in the first half of 2017. The average per tonne realisation on metallurgical coal shipments in the first half was $111.01, down from US$115.73 in the first half last year. The average per tonne realisation for thermal shipments was US$52.84, compared with US$50.65 in the first half last year. The average per tonne realisation for brokered shipments was US$129.54, compared with US$118.49 in the first half of 2017.

Total costs and expenses during the first half of 2018 were US$534.4 million, compared with US$535.3 million in the first half of 2017. Cost of coal sales was US$448.0 million, or US$65.33/t, compared with US$457.4 million, or US$64.68/t, in the year-ago period.

Selling, general and administrative (SG&A) expense in the first half of 2018 was US$27.8 million, compared with SG&A expense of US$16.7 million in the first half of 2017. The first half of 2018 expense included one-time stock reclassification and merger-related expenses of US$11.4 million. Depreciation, depletion and amortisation decreased to US$18.1 million during the first half of 2018 from US$24.8 million in the year-ago period.

Alpha recorded net income from continuing operations of US$63.4 million during the first half of 2018, compared with US$58.9 million during the first half of 2017.

Adjusted EBITDA was US$122.1 million in the first half of 2018, compared with Adjusted EBITDA of US$147.9 million in the first half of 2017.

Financial Performance - Discontinued Operations

Alpha recorded net income of US$1.2 million during the first half of 2018 compared to a net loss of US$35.2 million in the year ago period. The 2017 period included idle mine costs on properties substantially divested in October 2017 to Lexington Coal Company.

Liquidity and Capital Resources

Cash provided by operating activities, including discontinued operations, for the first half ended 30 June 2018 was US$73.7 million, compared with cash provided by operating activities of US$35.9 million for the first half of 2017.

Capital expenditures for the first half of 2018 were US$39.3 million, compared with US$24.5 million in the first half of 2017.

As of the end of the first half of 2018, Alpha had total liquidity of US$72.9 million, consisting of cash and cash equivalents. Total long-term debt, net of debt discounts and deferred debt issuance costs, and including the current portion of long-term debt as of 30 June 2018, was US$150 million.

Second Half 2018 Outlook

Alpha has updated its 2018 shipment guidance range of 13.8 - 14.5 million t. As of 30 June 2018, the company has domestic commitments for 2.5 million t of metallurgical coal priced at US$100.07/t and 3.3 million t of thermal coal priced at US$52.74/t.

Capital expenditures for 2018 are now expected to be in the range of US$67 million to US$72 million. According to David Stetson, "the three organic projects at Black Eagle, Road Fork 52 and Lynn Branch, along with the two recently completed projects at Panther Eagle and Workman Creek, will provide access to approximately 146 million t of metallurgical coal while lowering costs. This coal is primarily High Vol A and Low Vol reserves, therefore completion of these projects will serve to strengthen Alpha's position as the leading provider of high quality metallurgical coal."

Contura Energy Merger Update

ANR, Inc., Alpha Natural Resources Holdings, Inc. and Contura Energy, Inc. (Contura) jointly announced a definitive merger agreement on April 30, and on July 16, Contura filed a confidential registration statement on form S-4 with the U.S. Securities and Exchange Commission. The all-stock transaction is expected to close prior to year-end.