Massey Energy turns 2Q profit in tough climate

Coal producer Massey Energy Co. said Tuesday it turned a better-than-expected profit in the second quarter as it booked fewer charges and increased shipments to power plants despite slumping demand for electricity amid the recession.

The Richmond, Va.-based company said it earned $20.2 million, or 24 cents per share, in the period, compared with a loss of $93.3 million, or $1.16 per share, in the same quarter last year, when it recorded a $245.3 million charge related to a lawsuit.

Total revenue fell to $697.6 million from $826.8 million, as coal revenue slipped to $603.2 million from $710.3 million and freight revenue declined.

The results topped expectations of Wall Street analysts surveyed by Thomson Reuters, who were expecting, on average, earnings of 16 cents per share on $660.6 million in revenue. Shares rose $1.16, or 5 percent, to $23.90 in after-hours electronic trading following the report.

Demand for coal, which produces about half the nation's electricity, has slumped with the economy this year, prompting mine operators to slash production goals. Massey has made cuts as well - slashing expenses to $648.9 million from $935.4 million in the year-ago period - but said it has gained market share anyway.

"Our coal tons shipped to utilities increased 8 percent compared to the first half of 2008 while it is estimated that total shipments of Central Appalachia coal to utilities declined by 7 percent in the same period," Chief Executive Don Blankenship said in a statement.

Massey said coal burn at utilities in its key southeastern U.S. market dropped 19 percent during the same period and central Appalachian coal consumption dropped 25 percent over the same time frame.

Massey said its cash margin dipped to $10.48 per ton, from $15.94 in second-quarter 2008 as prices slipped and some expenses increased. The company blamed lower shipments of high-priced metallurgical coal to steelmakers for the lower average price it received per ton in the quarter. Global steel output has plummeted as the recession curbs demand for cars and construction.

Following the lead of Peabody Energy, Arch Coal and other big producers, Massey lowered production, cut jobs, idled mines and revised price estimates for the rest of the year. The company now expects production ranging from 38.5 million to 40.5 million tons, down from earlier projections of 38 million to 41 million.

But Massey now sees per ton price estimates in a range of $61.50 to $63.50, up from a prior estimate of $60 to $63. Costs now are expected to range from $51.50 per ton to $53 per ton, also up from an earlier estimate of $50 to $53 per ton.

For 2010 Massey expects produced coal shipments to be in the range of 37.0 to 42.0 million tons, with an average sales price rising to $60 to $65 per ton. Cash costs for 2010 are expected to range between $48 to $52 per ton.

The company expects capital expenditures in 2010 will remain in the range of $100 million to $200 million. With results in these ranges, Massey said it believes it would generate solid free cash flow for the year.

Massey Energy Co. is the nation's fourth-largest coal producer based on revenue and operates mines in West Virginia, Kentucky and Virginia. Shares closed Tuesday's regular session down 76 cents, or 3.2 percent, at $22.74. The stock is down 73 percent from its 52-week high of $81.95, reached a year ago before the market meltdown.