UPDATE: Peabody 3Q Net Up; Arcelor Backs Out Of Macarthur Deal
25 Ottobre 2011 - 5:30PM
Dow Jones News
Peabody Energy Corp.'s (BTU) third-quarter profit rose roughly
in line with analysts' expectations, but shares of the company sank
after ArcelorMittal (MT, MT.AE) said it was backing out of a
planned joint acquisition of an Australian coal company.
Arcelor's move put Peabody in position to acquire Macarthur Coal
Ltd. (MCC.AU) on its own, and Peabody's shares slid as investors
digested the news.
Peabody shares, down 36% year to date, recently traded down 7.9%
at $37.69.
"While we anticipated a positive joint venture with
ArcelorMittal, we have always preferred a larger ownership,"
Peabody Chief Executive Gregory H. Boyce said.
Arcelor, in a statement Tuesday, said it had "determined that it
would no longer be appropriate to allocate substantial capital to
the acquisition of a non-controlling, minority business
interest."
On Monday, Peabody, the world's largest private-sector coal
company, and Arcelor, the world's top steelmaker, completed their
roughly $5.05 billion acquisition of the Australia-based
coal-mining company. Peabody said it was hoping the Macarthur deal
would increase its access to fast-growing Asian markets.
"The Macarthur acquisition expands Peabody's presence in the
highest-growth coal markets with a quality metallurgical-coal
product," Boyce said. "It provides a large resource base,
significant potential synergies and a major growth pipeline."
Lucas Pipes, an analyst with Brean Murray Carret & Co., said
in a note that investors are likely to be "taken aback" by the
Macarthur news, as Peabody will likely have to offer shares as well
as increase its debt load to finance the deal. "Given the current
uncertainty in the global economy, we believe that investors will
initially view this development with skepticism," Pipes said.
Despite recently strong earnings, Peabody faced a short-term
setback in August, when a cave-in blocked the main entrance at one
of its Australian mines. The company lowered its third-quarter and
full-year earnings guidance, saying the mine's closure would reduce
shipments and raise costs.
U.S. coal producers have seen their stocks plummet this year as
the companies have battled against rising costs and production
problems. Last week, Patriot Coal Corp. (PCX) said its
third-quarter loss widened as thermal-coal sales dropped and
operating costs rose.
Peabody reported earnings of $274.1 million, or $1 a share, up
from $224.1 million, or 83 cents a share, a year earlier. Last
month, the company forecast downbeat adjusted earnings of between
70 and 90 cents a share.
Revenue rose 9.2% to $2.04 billion, above market expectations of
$2.02 billion. Peabody's operating margin fell to 18.5% from
23.8%.
Global sales declined 0.6% to 63.6 million tons. Revenue per ton
increased 6.5% in the U.S. and 15% in Australia.
Peabody lowered the higher end of its target total sales for the
year to 245 million short tons from 255 million tons.
-By Matt Day and Ben Fox Rubin, Dow Jones Newswires;
212-416-4986; matt.day@dowjones.com
-Alex MacDonald contributed to this article.
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