Here’s Why Westmoreland Coal Beat 3Q16 Estimates



Segmental adjusted EBITDA

Westmoreland Coal’s 3Q16 results were driven by a strong operating performance from its Coal-US and Coal-WMLP operating segments. The adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of the US coal (KOL) mining segment came in at $36.7 million compared to $14.8 million in 3Q15 and $19.8 million in 2Q16.

Also, the Coal-WMLP segment reported a higher adjusted EBITDA of $22.7 million compared to $15.7 million in 3Q15. This increase was partially offset by a decrease in adjusted EBITDA from the company’s Canadian coal mining operations.

The adjusted EBITDA of WLB’s Canadian coal mining operations came in at $17.6 million as compared to $23.7 million during the same period in 2015. In contrast, the company’s power segment reported a significant increase in adjusted EBITDA from $0.1 million in 3Q15 to $0.51 million in 3Q16.

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Westmoreland Coal’s overall adjusted EBITDA

For 3Q16, Westmoreland Coal reported a record high adjusted EBITDA of about $71 million as compared to $48 million in 3Q15. Also, WLB’s adjusted EBITDA was higher than the analysts’ estimate of $67 million.

Why the increase?

The year-over-year increase was primarily driven by $18.5 million in contributions from the company’s San Juan acquisition. Strong summer cooling demand and operational improvements at the company’s WLMP segment helped WLB to post a record high adjusted EBITDA for 3Q16. However, WLB recorded a lower loan lease receivable amount of $2.6 million in its 3Q16 adjusted EBITDA as compared to $8.7 million in 3Q15. Higher adjusted EBITDA implies higher income from the company’s ongoing operations.

Moving forward, winter heating demand will be key to a strong operational performance from WLB and its peers Alliance Resource Partners (ARLP), Cloud Peak Energy (CLD), Peabody Energy (BTUUQ), Arch Coal (ARCH), and Alpha Natural Resources (ANRZQ).

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


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