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UPDATE 2-Walter Energy says coal prices firming, shares rise

Wednesday, 30 Oct 2013 | 12:28 PM ET

Oct 30 (Reuters) - Coal miner Walter Energy Inc said prices on steel-making coal are improving and will continue to firm next year due to strong demand in Asia, sending its shares up 3.3 percent despite a larger-than-expected quarterly loss.

The news cheered Walter investors, who have endured a 55 percent drop in the stock this year as weak demand for steel has hit prices of metallurgical coal.

"It appears that the market for their product, which is met coal, is seeing some signs of positive life," Sterne Agee analyst Mike Dudas said, adding that the company had done a good job of controlling costs.

Walter rival Arch Coal Inc on Tuesday cut its production outlook for steel-making coal for the second time this year due to weak prices.

However, Walter Energy Chief Executive Walt Scheller said prices were showing sustainable improvement.

"It's good to see the market moving in a positive direction," he told analysts on a conference call. "And met coal prices should further improve in 2014 assuming continued strong demand in Asia."

Walter Energy reported a net loss of $100.7 million, or $1.61 per share, for the third quarter ended Sept. 30. ()

The company's net loss was $1.1 billion, or $16.97 per share, in the year-ago quarter as it took a $1.1 billion impairment charge related to its acquisition of Western Coal.

Excluding one-time items, the third-quarter loss was $1.30 per share, bigger than the average analyst estimate of $1.02, according to Thomson Reuters I/B/E/S.

Revenue fell nearly 26 percent to $455.8 million, primarily because of lower prices of metallurgical coal.

Higher metallurgical coal sales volumes and lower costs partially offset the impact of low prices, Walter Energy said.

Cash costs as a percentage of sales for metallurgical coal fell 10.8 percent in the third quarter, Walter Energy said.

Metallurgical coal accounted for 84 percent of total coal sales volume in the third quarter, up from 74 percent a year earlier.

The company said it expected metallurgical coal output to rise in the fourth quarter from the third quarter.

Walter Energy, which also produces thermal coal used in power generation, said in August that it was aiming to raise $250 million from asset sales over nine months. It has yet to announce any such sales, however.

The company, with operations in North America and the United Kingdom, has slashed capital spending and cut its quarterly dividend earlier this year to 1 cent per share from 12.5 cents.

Walter Energy shares were up 51 cents, or 3.3 percent, at $15.88 in mid-day trading. The stock hit a high of $16.54 earlier in the session.

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