UPDATE 2-Arch Coal quarterly profit down but beats estimate

By Steve James NEW YORK, Oct 30 (Reuters) - Arch Coal Inc said on Friday that third-quarter profit dropped as it sold less coal at lower prices, but the results beat its second-quarter performance and exceeded Wall Street estimates. The company, whose shares rose nearly 5 percent in premarket trade, said a combination of production cuts and growing demand as the global economy rebounds from last year's downturn was likely to push coal prices higher. "In light of the 'Great Recession' of 2009, we're pleased to be profitably managing through a severe downturn in energy markets," said Chairman and Chief Executive Steven Leer. "We are also seeing domestic and global economies begin to transition from recession to recovery." He said Arch's recent acquisition of Rio Tinto's Jacobs Ranch mine -- adjacent to Arch's Black Thunder mine in Wyoming -- would help position Arch "for the upturn which we believe is just beginning to be reflected in coal demand. "Ongoing supply constraints here at home and around the world -- coupled with a rebound in energy demand globally -- will exert upward pressure on coal prices over the long term," Leer said in a statement. Net earnings were $25.2 million, or 16 cents per share, compared with year-earlier earnings of $97.8 million, or 68 cents per share, the St.

Louis-based company said. Revenue fell to $615 million from $769.5 million. Analysts were expecting 4 cents per share on revenue of $605.1 million, according to Thomson Reuters I/B/E/S. Arch said it sold 29.1 million tons in the quarter, down from 34.8 million tons in the same quarter of 2008, but an improvement on 27.4 million in the second quarter. The average sales price slipped to $20.05 from $20.38 a year earlier, but was higher than the $19.43 in the second quarter. In July, with coal prices slumping, Arch lowered its sales volume estimate for this year for a third time to between 114 million and 118 million tons. Last year Arch sold 137.8 million tons of coal. Leer said Arch's third-quarter results were an improvement over the second quarter. "We achieved margin expansion in each operating segment, driven by increased metallurgical coal demand in Central Appalachia and continued successful cost control across all regions." Arch completed the acquisition of Jacobs Ranch mine on Oct. 1, for about $764 million, which includes an estimate for working capital adjustments. The company estimates synergies from the transaction of between $45 million and $55 million annually, beginning in 2010. About one-half of the synergies represent operational cost savings, while the remaining savings relate to administrative cost reductions as well as enhanced coal-blending optimization opportunities. During the fourth quarter, Arch said it expects to record about $8 million of one-time acquisition-related expenses. (Reporting by Steve James; Editing by Gerald E. McCormick and Steve Orlofsky) Keywords: ARCHCOAL/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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