UPDATE 1-Alpha Natural loss smaller than estimated as cost cuts pay off

Thursday, 31 Oct 2013 | 7:47 AM ET

* Adjusted loss $0.61/share vs est. $0.77

* Revenue falls 25 percent to $1.20 bln

* Cuts 2013 capital budget to $260 mln-$290 mln from $275 mln-$325 mln

Oct 31 (Reuters) - Alpha Natural Resources Inc reported a smaller-than-expected quarterly loss as lower costs helped the U.S. coal miner cope with weak coal prices, and the company cut its capital budget for the year.

Alpha Natural, which mines both thermal coal used in power generation and metallurgical coal used in steel-making, cut its 2013 expenditure target to $260 million-$290 million from $275 million-$325 million.

The company set a budget of $250 million-$350 million for 2014.

Thermal coal prices have fallen as power producers are switching to natural gas, while excess supply and weak demand from China has weighed on prices of steel-making coal.

However, Alpha Natural Chief Executive Kevin Crutchfield signaled improving conditions.

"We are encouraged that the metallurgical coal market appears to be gradually improving from its recent apparent low point, and domestic thermal coal inventories have trended down, planting the seeds for healthier market conditions in the future," Crutchfield said in a statement.

Net loss widened to $458 million, or $2.07 per share, in the third quarter ended Sept. 30 from $46 million, or 21 cents per share, a year earlier.

Adjusted loss was 61 cents per share, lower than the average analyst estimate of 77 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 25 percent to $1.20 billion.

Alpha Natural's shares closed at $6.74 on the New York Stock Exchange on Wednesday.

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