Peabody Energy, has reported a drop in Q2 earnings on the back of lower coal prices. The US coal miner recorded earnings of US$ 254.3 million compared with US$ 450.1 million last year.
In response, the coal miner intends to cut 400 jobs in Australia. Reuters reported the company would make 170 redundancies and not fill 270 vacant positions. This comes after the company cut 450 contractor jobs last month.
"This difficult decision has been made in response to near-term global economic challenges," a company spokesperson said in an emailed statement quoted by Reuters. "The reduction has been made to align the company's workforce size with other cost-reduction activities."
Peabody’s Australian earnings of US$112.5 million were hit by US$ 200 million due to lower pricing. The price declines were partly offset by a 5% increase in production. They also benefited from a fall in the Australian dollar exchange rate that drove a 6% improvement in costs per ton. Meanwhile, US revenues of US$ 970.9 million fell compared to 2012 on lower pricing and a higher percentage of Western US shipments. Earnings were, however, in line with last year as a 6% decline in average unit costs mitigated lower prices.
Coal market outlook
Despite the job cuts and fall in earnings, Peabody’s CEO, Gregory Boyce was more positive on this year’s outlook: "Both US and global coal demand continue to grow, and we expect the seaborne market to exceed 1.2 billion t this year as China and India set new import records. While seaborne coal supplies remain at elevated levels, the world's largest producers – China and the US – have reduced production and we expect additional cutbacks in the second half of the year."
In the US, Boyce pointed to an increase in coal-fired power generation: "Despite a slow start to summer, US coal generation is up significantly year to date and natural gas generation has declined sharply."The company projects 2013 US coal consumption for electricity generation will grow by 50 to 70 million short t on last year’s levels as coal has regained significant market share from natural gas. Coal demand increased 11% in the first half of the year and accounted for approximately 40% of total electricity generation. Natural gas prices have been significantly above 2012 levels, leading to gas-to-coal switching and a 15% decline in natural gas generation.
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