Pulling Back the Curtain on ARLP’s 4Q16 Operating Performance
Alliance Resource Partners’ (ARLP) 4Q16 operational performance was driven by lower overall operating expenses on a year-over-year (or YoY) basis.
ARLP measures the operating expenses of its segments through adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) expense per metric ton. This measurement includes operating expenses, outside coal (KOL) purchases, and other income divided by tons sold.
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For 4Q16, ARLP’s overall segment-adjusted EBITDA expense per ton came in at $27.72, compared to $33.19 in 4Q15. Favorable product mix, improved recoveries at the company’s River View, Gibson South, and Hamilton mines, and increased production at its Tunnel Ridge longwall operation and Mettiki mine helped to lower its segment-adjusted EBITDA expense per ton on a YoY basis.
Alliance Resource Partners’ adjusted EBITDA
Higher-than-anticipated coal shipments and lower operating expenses helped Alliance Resource Partners to beat analysts’ 4Q16 EBITDA estimates. Alliance Resource Partners’ 4Q16 adjusted EBITDA came in at $206 million, compared to analysts’ expectation of $174 million. A higher EBITDA implies higher income from a company’s operations.
Following Alliance Resource Partners’ 4Q16 results, analysts have revised their future EBITDA estimates upward for the partnership. For the coming quarter, analysts expect ARLP’s EBITDA to be ~$123 million, compared to their pre-4Q16 estimate of $116 million.
However, the future operating margins of ARLP and its peers Cloud Peak Energy (CLD), Arch Coal (ARCH), and Peabody Energy (BTUUQ) largely depend on a sustainable recovery in coal prices.
In the next part of this series, we’ll look at Alliance Resource Partners’ leverage and liquidity position at the end of 2016.