A Closer Look at Westmoreland Coal’s 2017 Guidance

Westmoreland Coal’s guidance

Westmoreland Coal Company (WLB) affirmed its 2017 sales guidance after the second-quarter earnings were released on July 27. For fiscal 2017, WLB estimates its adjusted EBITDA[1. Earnings before interest, tax, depreciation, and amortization] to be in the range of $250 million–$270 million, which is lower than its prior guidance of $280 million–$310 million. Westmoreland Coal decreased its free cash flow guidance from $115 million–$140 million to $90 million–$115 million.

A Closer Look at Westmoreland Coal’s 2017 Guidance

However, WLB retained its guidance for coal sales as 40 million tons–50 million tons. Westmoreland Coal also maintained its capital expenditure guidance of $40million–$45 million and cash interest guidance of $90 million for fiscal 2017.

For 1H17, Westmoreland Coal posted adjusted EBITDA of approximately $120.8 million and free cash flow of nearly $47.5 million. The adjusted EBITDA and free cash flow figures of WLB include early loan repayment and lease receivables worth around $52 million related to the Genesee mine.

Foreign exchange rate

Unlike its coal (KOL) mining peers such as Natural Resource Partners (NRP), Peabody Energy (BTU), and Alliance Resource Partners (ARLP), Westmoreland Coal derives a major part of its revenue from its Canadian mining operations. So a stronger Canadian dollar can have a positive impact on Westmoreland Coal’s total revenue.

A Closer Look at Westmoreland Coal’s 2017 Guidance

As per the Bank of Canada’s daily noon exchange rates, the Canadian dollar became strong against the US dollar over the past six months, which could have a positive effect on Westmoreland Coal’s revenue in 3Q17.

Next, let’s take a look at Westmoreland Coal’s liquidity and debt position.