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Arch Coal’s Appalachian Costs Rise in 2Q15

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Revenues

In Part 3, we looked at shipments and prices for Appalachian coal in 2Q15 and 1H15. In all, Arch Coal (ACI) generated revenues of $224.3 million from its Appalachian segment in 2Q15, down from $281.0 million in 2Q14. 1H15 revenues for the segment came in at $447.7 million, down from $560.1 million in 1H14. Revenues were affected by lower shipments and pricing.

Overall (all segments together), Arch Coal (ACI) reported $644.5 million in revenues in 2Q15 compared to $713.8 million in 2Q14. Revenues for 1H15 stood at $1321.5 million compared to $1449.7 million in 1H14. The company expects to sell 120 million to 124 million tons of thermal coal (for all segments) and another 6.0 million to 6.8 million tons of metallurgical coal in 2015.

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Arch Coal’s Appalachian costs

Arch Coal (ACI) reported costs per ton of $76.46 in Appalachia in 2Q15. This was marginally up from $76.25 in 2Q14. However, costs escalated substantially from 1Q15’s $68.55 per ton. Costs per ton rose due to lower shipments as well as equipment movements at the company’s two low-cost mines, Leer and Mount Laurel. Lower shipments resulted in fixed costs being divided among fewer tons, increasing the cost per ton.

The segment’s 1H15 cost per ton came in at $72.56, down from 1H14’s $78.49 per ton, primarily due to impressive cost performance in 1Q15.

Coal (KOL) producers, including ACI, Peabody Energy (BTU), Consol Energy (CNX), and Cloud Peak Energy (CLD), have focused on cost saving amid pricing pressure.

Operating loss per ton

Arch Coal’s Appalachian segment reported an operating loss of $10.63 per ton in 2Q15 compared to an operating loss of $6.89 per ton in 2Q14. The loss expanded primarily as pricing fell.

For 1H15, the loss came in at $7.03 per ton compared to a loss of $9.95 per ton in 1H14. Losses in 1H narrowed because of the company’s stellar cost performance in 1Q15.

What about ACI’s Powder River Basin segment? Let’s take a look at that segment in the next two parts of this series.

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