Revenues totalled $742 million for the three months ended September 30 and adjusted earnings before interest, taxes, depreciation, depletion and amortisation from continuing operations was $72 million, representing a slight increase compared with the same quarter of last year.
Arch CEO John Eaves said the company had delivered a solid operating performance in the third quarter.
“In particular, our western thermal operations improved cash margins per tonne versus the second quarter due to increased shipment levels, higher price realisations and continued strong cost control,” he said.
“Looking ahead, we expect our western thermal operations, particularly in the Powder River Basin, to benefit from incrementally improving rail service in the fourth quarter of 2014 and in 2015.
“In addition, we expect our metallurgical coal platform in Appalachia to benefit from a higher contribution by the low-cost Leer mine coupled with the favourable impact of idling the higher-cost Cumberland River complex.”
During the third quarter of 2014, Arch generated $80 million in cash from operations and spent $23 million on capital outlays, resulting in positive free cash flow of $57 million.
As of September 30, 2014, Arch increased its cash and short-term investments balance to $1.05 billion compared with about $990 million at June 30, 2014. In addition, the company's available liquidity, which includes its cash position and undrawn borrowings on its credit facilities, totalled more than $1.3 billion at the end of September.
Arch CFO John Drexler said Arch continued to execute its plan to control costs and expenses, reduce capital outlays and preserve liquidity.
“To that end, we are further reducing our expectations for corporate administrative expense and capital spending in 2014, and expect to end the year with about $1 billion in cash and short-term investments,” he said.
“This strong liquidity position, coupled with no debt maturities until mid-2018, provides Arch with the financial flexibility needed to navigate current coal market conditions.”
For 2014, Arch is maintaining its targeted sales volume range, which reflects the expectation for further improvement in rail service in the Powder River Basin during the fourth quarter. The company also recognises the potential for some contracted tons in the Powder River Basin to carry over into 2015.
Arch has again reduced its 2014 cost guidance range for the Bituminous Thermal segment due to a strong operating performance achieved year-to-date. The company also further reduced its corporate administrative budget, and now projects expenses of between $117 million and $121 million for 2014, representing a $7 million reduction since the start of the year.
Additionally, Arch is reducing its capital expenditures for 2014, and now expects to spend between $160 million and $170 million for sustaining capital programs, including land and reserve additions.
“While we continue to face challenges in coal markets, we remain focused on managing those factors that we can control,” Eaves said.
“We believe our ongoing efforts to optimise our asset portfolio, control our costs, reduce capital spending and preserve financial flexibility are bearing fruit, and will position Arch for success, growth and value creation as coal markets recover.”
