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Australian operations lead to fall in Peabody’s EBITDA in 2014

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Gross margin per ton

Gross margin per ton is equal to selling price per ton minus operating cost per ton. While Peabody Energy’s gross margin per ton in US Western operations improved, it dropped elsewhere, especially in Australia. Australian operations reported gross margins per ton of $1.94 in fiscal 2014, substantially down from $9.08 in fiscal 2013.

Gross margin per ton for US operations came in at $5.61 in fiscal 2014 compared to $6.09 in fiscal 2013. The fall in US margins was driven by Midwestern operations, where margins dropped to $12.07 in fiscal 2014 from $16.27 in fiscal 2013. Western margins increased to $4.63 a ton in fiscal 2014 from $4.39 a ton in fiscal 2013.

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Adjusted EBITDA falls

Peabody Energy (BTU) reported adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $814.0 million in fiscal 2014, down from $1.0 billion in fiscal 2013. Apart from the insignificant trading and brokerage segment, adjusted EBITDA across all the segments fell during the year. EBITDA from Australian operations dropped to $74.4 million in fiscal 2014 from $316.6 million in fiscal 2013 on the back of lower gross margin per ton.

Adjusted EBITDA for US operations dropped to $1.07 billion in fiscal 2014, from $1.13 billion in fiscal 2013. Trading and brokerage segment turned EBITDA positive with an adjusted EBITDA of $14.9 million in fiscal 2014 compared to EBITDA level losses of $19.9 million in fiscal 2013.

Performance of other major coal producers

Among the major coal producers, Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD) reported a drop in adjusted EBITDA in fiscal 2014. Alpha Natural Resources (ANR) was an exception, with 67% increase in adjusted EBITDA. All major American coal producers are a part of the iShares Russell 3000 ETF (IWV).

We’ll explore Peabody Energy’s net income and cash flows in the next article.

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