Revenues are negatively impacted by losses primarily related to coal hedges contracted in the first half of 2021, which effectively locked in the sales price on 2.1 million metric tons (mt) of expected production at the company’s Wambo mine (above) in Australia. (Photo: Peabody)
In a preliminary release of its third-quarter results this week, Peabody said it expects to report third-quarter revenue of $670 million to $690 million and adjusted EBITDA of $280 million to $290 million. Peabody posted $193 million of cash margin in support of forward-pricing contracts ending the quarter with $587 million of cash and cash equivalents and has retired senior secured debt of nearly $250 million year-to-date as of October 15.
“The preliminary financial results we reported today continue to demonstrate the disciplined approach we are taking to control costs, expand margins and reduce debt,” Peabody President and CEO Jim Grech said. “Coal sales to customers were in excess of $900 million, the highest level in seven quarters. We remain optimistic about the future given strong coal pricing and global demand fundamentals.”
The increase in adjusted EBITDA compared to the prior year of $95.4 million is attributable to higher realized prices from robust seaborne coal demand and a $26 million mainly non-cash gain on the sale of the Millennium operation in Australia, according to the company. In the third quarter, revenues were negatively impacted by $238 million of unrealized mark-to-market losses primarily related to coal hedges contracted in the first half of 2021, which effectively locked in the sales price on 2.1 million metric tons (mt) of expected production at the company’s Wambo mine in Australia with settlements of 1.4 million mt in 2022 and 700,000 mt in 2023. The company said the hedge contracts were placed to support the profitability of the mine by securing average prices of $84/mt through mid-2023 as part of a strategy to extend the expected life of the mine.
Peabody will deliver its full third-quarter earnings report on Thursday, October 28.
