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New UserCoal miner Peabody cuts dividend as demand remains weak
28 Jan 2015
Coal miner Peabody Energy Corp slashed its quarterly dividend as it strives to rein in costs amid tepid demand, due to expectations that prices of natural gas, a cheaper alternative to steam coal, would remain weak in 2015.
The miner cut its quarterly dividend by 97 percent to 0.25 cents per share from 8.5 cents, sending its stock plunging as much as 9 percent to a 12-year low of $6.01, amid a weak broader market.
The dividend cut will save Peabody $90 million a year, Clarkson Capital Markets analysts said in a note.
The company, which sells both higher-margin metallurgical coal and power-producing coal, and rivals such as Alpha Natural Resources Inc and Arch Coal Inc have been hit hard by falling prices due to a global supply glut and weak demand for steel-making coal from China.
Natural gas prices fell by nearly a quarter to $3.36 per million British thermal units (MMBtu) in 2014, while coal futures have fallen to their lowest since 2009.
Peabody, however, said it expects global imports for steel-making coal in 2015 to outpace supply growth for the first time since 2011.
Tighter cost controls in the fourth quarter and higher sales volumes of steel-making coal in Australia helped the company post better-than-expected earnings before interest, taxes, depreciation and amortization (EBITDA).
Peabody's fourth-quarter EBITDA of $207.7 million topped the average analyst estimate of $192.8 million, according to Thomson Reuters I/B/E/S, driven mainly by a 19 percent fall in operating costs per ton in Australia.
The company, which expects costs in the region to fall by 2 to 4 percent in 2015, recently agreed to form a joint venture with Glencore Plc at two neighboring mines in Australia's Hunter Valley in a bid to slash costs.
Peabody's shares were down 7 percent at $6.22 in late afternoon trading on the New York Stock Exchange.
KW: Reuters