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Westmoreland Coal’s 2Q16 Net Income Missed Analyst Estimates

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Segmental operating income

Westmoreland Coal (WLB) derives the majority of its operating income from its core coal (KOL) mining and power plant operations in the US and coal mining operations in Canada. The Canadian Coal Mining segment witnessed a significant drop in operating income in 2Q16. Operating income from the segment came in at $4.2 million, as compared to $9.5 million in 2Q15 and $12.4 million in 1Q16.

Also, WLB’s WMLP segment saw a major decline in it operating income, from $0.8 million in 1Q16 to -$4.3 million in 2Q16. The company’s US Coal Mining and Power Plant segments reported YoY (year-over-year) increases in operating income.

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Consolidated operating income

For 2Q16, Westmoreland Coal’s consolidated operating income came in at $2.98 million, as compared to an operating loss of -$6.86 million in 2Q15 and an operating income of about $11.5 million in 1Q16. However, the company missed the analyst operating income estimate of ~$20.6 million by a wide margin.

This decrease was mainly attributable to the lower-than-anticipated operating income from company’s Canadian operations and a significant decline in shipments from company’s WMLP segment.

Westmoreland Coal’s net loss

In 2Q16, Westmoreland Coal reported net losses of about $25.4 million, as compared to the analyst net loss expectation of $7.5 million. The deviation was primarily due to declines in operating income across the company’s major operating segments accompanied by an increase in interest expenses.

The continued downturn in the commodities market could continue to have a significant impact on the bottom lines of Westmoreland Coal (WLB), Cloud Peak Energy (CLD), Arch Coal (ACIIQ), Alpha Natural Resources (ANRZQ), and Peabody Energy (BTUUQ).

In the next part of this series, we’ll look at Westmoreland Coal’s leverage and liquidity position.

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