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Cloud Peak (CLD) Posts Wider Q1 Loss, Revenues Drop

Coal producer Cloud Peak Energy Inc. CLD reported an adjusted loss of 53 cents per share in the first quarter of 2016, much wider than the Zacks Consensus Estimate of a loss of 15 cents and the year-ago loss of 5 cents per share.

GAAP loss was 59 cents per share compared with a loss of 8 cents per share in the prior-year quarter. The difference between GAAP and operating figures in the reported quarter was due to adjustments of certain one-time items.

Revenue

Cloud Peak Energy’s quarterly revenues decreased 42.9% year over year to $181.3 million and also lagged the Zacks Consensus Estimate of $202 million by 10.2%.

The decline in total revenues was primarily due to the lower demand of coal from the utilities because of the mild winter season and higher usage of cheap natural gas.

Segment Performance
    
Owned and Operated Mines

In the quarter, the company sold 13 million tons of coal compared with 19.7 million tons in the year-ago period. Realized price per ton of coal during the quarter was $12.65, down nearly 3.1% year over year.

Logistics and Related Activities

Total tons delivered during the quarter were 0.3 million tons, down from 1.7 million tons delivered in the prior-year quarter.  Revenues from this segment were $14 million compared with $69.4 million in the prior year. The significant drop was primarily due to lower international shipments as a result of continued weak international prices for seaborne thermal coal.

Highlight of the release

Total costs and expenses in the reported quarter were $206.9 million, down 33.2% from $309.6 million in the year-ago quarter.

In the first quarter, 13 million tons of coal was sold, which is 34.3% lower than the previous year. Cash margin per ton in the reported quarter was $1.50 compared with $3.03 per in the year-ago period.

During the quarter, Cloud Peak Energy received approval from the Wyoming Department of Environmental Quality to continue to self-bond $90 million of reclamation obligations at the Antelope Mine. For the second quarter, an additional $100 million was approved for the self-bonding renewal of the Cordero Rojo Mine.

Financial Update

As of Mar 31, 2016, the company’s cash and cash equivalents were $79.39 million, down from $89.31 million as of Dec 31, 2015.

Senior notes as of Mar 31, 2016, were $491.53 million, marginally higher than $491.2 million as of Dec 31, 2015.

Cash (used)/ provided by operating activities in first-quarter 2016 was ($0.65) million versus $31.9 million in first-quarter 2015.

Capital expenditure in the first quarter of 2016 was $7.6 million, higher than the year-ago level of $6.4 million.

Guidance

Cloud Peak Energy expects 2016 coal shipment in the range of 60−65 million tons. Out of the expected shipments nearly 63 million tons are committed with a fixed price of $12.72 per ton.

Capital expenditures for the full year are expected to be in the range of $25 million to 35 million.

Peer Releases

SunCoke Energy Inc. SXC posted first-quarter 2016 adjusted earnings of 5 cents per share, outpacing the Zacks Consensus Estimate by a penny.

CONSOL Energy Inc. CNX) reported an adjusted loss of 7 cents per share for the first quarter of 2016, narrower than the Zacks Consensus Estimate of a loss of 9 cents.

Upcoming Release

Natural Resource Partners LP NRP is scheduled to release first-quarter results on May 5, 2016. The Zacks Consensus Estimate for the quarter stands at $1.27 per unit.

Our View

Cloud Peak Energy’s performance during the first quarter was lower than expected with declining shipments and the drop in realized coal prices hurting results.

The softness in coal demand is expected to persist for the best part of 2016 due to extensive use of cheap natural gas in the U.S. power sector, declining demand from China, and the strong U.S. dollar. The company is resorting to cost cutting initiatives to counter the weak coal fundamentals.

Cloud Peak Energy currently has a Zacks Rank #5 (Strong Sell).

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