Alliance Resource Beats Earnings, Sales

Zacks

Alliance Resource Partners, L.P. (ARLP) announced second quarter 2013 operating earnings of $1.96 per unit, up 21.7% from the Zacks Consensus Estimate of $1.61. The results of the partnership were 7.1% higher than the year-ago earnings of $1.83 per unit.

Total Revenue

Total revenues at the end of the second quarter were $553.6 million versus $529.9 million in the year-ago period, which reflects an increase of 4.5%. The revenues also surpassed the Zacks Consensus Estimate of $544 million by 1.8%.

The year-over-year improvement in revenues was primarily due to a 13.3% increase in the volume of coal sold.  This was marginally offset by the 6.8% decline in sales price per ton from the comparable year-ago period.

Highlights of the Release

Total operating expenses of the partnership during the quarter were $438 million, up 3.2% from $424.4 million incurred in the year-ago period. Increasing sales and production volumes led to higher operating expenses.

Alliance Resource Partners registered a 23.6% year-over-year increase in production volume in the reported quarter. The solid performance at the Gibson North, River View and Onton mines and increased volumes at the Tunnel Ridge longwall operation boosted production.

The partnership also hiked its quarterly cash distribution rate to $1.525 per unit, up 2% sequentially from $1.13 per unit and up 8.5% year over year from $1.0625 per unit.

Guidance

The strong year-to-date performance has prompted Alliance Resource Partners to revise its guidance upward. Coal production and sales volumes for 2013 are expected in the range of 39.3–39.6 million tons, and 38.6–39.6 million tons, respectively, exceeding prior expected levels.

Alliance Resource expects total revenue for 2013 in the range of $2.165 billion to $2.225 billion excluding transportation revenue.

EBITDA is expected to range between $675 million and $695 million and net income is expected to come in a band of $375 million to $395 million in 2013.

The partnership expects average coal sales price per ton in 2013 to be 1% to 3.5% lower than last year, since the sales mix is not expected to include sales in the metallurgical coal markets.

The partnership expects to make capital investment in the range of $370 million to $400 million in 2013. These expenses will be directed towards mine expansion, infrastructure projects and reserve acquisitions.

Other Coal Company Releases

Peabody Energy Corp. (BTU) reported second quarter 2013 earnings of 33 cents per share, widely beating the Zacks Consensus Estimated of a loss of 5 cents.

CONSOL Energy Inc. (CNX) reported a loss of 3 cents per share for the second quarter of 2013, much below the Zacks Consensus Estimate of earnings of 18 cents.

Alliance Holdings GP, L.P. (AHGP) reported earnings of $1.02 per unit in the second quarter, surpassing the Zacks Consensus Estimate of 87 cents for the quarter.

Our View

Alliance Resource Partners was able to secure new coal sales commitments of nearly 2.6 million tons in the reported quarter, bringing the year-to-date new coal sales commitment to 4.5 million tons. The coal market will gradually improve in the U.S., with the recovery of natural gas prices, driving fresh demand for thermal coal for power production.  The partnership is well positioned with its low cost production capabilities to benefit from the improvement in coal demand.

Based in Tulsa, Okla., Alliance Resource Partners produces and supplies coal to utilities and for industrial usage primarily in the U.S.  The partnership currently retains a Zacks Rank #2 (Buy).
 

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