While fourth-quarter coal revenues decreased 6% to $US407.6 million versus the same period in 2005, net income increased over $50 million, due in part to a change in an accounting estimate, but also due to a 19% increase in coal margin per ton resulting from a 4% increase in prices compared with only a 1% rise in cost per ton.

 

Unlike the fourth quarter, Alpha posted an impressive 19% increase in coal revenues for the 2006 year along with strong increases across the board in net income and other leading financial indicators.

 

Revenues topped $1.68 billion compared to $1.41 billion the previous year, resulting in an increase in net income of over $100 million, from $21.2 million in 2005 to $128.2 million in the current year. This increase in profits was primarily due to a 9% increase in coal sales combined with a 34% increase in margins per ton.

 

From a production and sales standpoint, Alpha’s fourth quarter showed an 8% increase over the fourth quarter of 2005 to nearly 6 million tons, although sales decreased 9% to 7Mt. Production for the year was an even more impressive 24.8Mt, 21% more than in 2005. Sales of 29.1Mt showed a 9% increase over the 26.7Mt sold in the prior year.

 

Alpha also took the opportunity to release its expectations for 2007, which included 24–25Mt of coal production with another 4–5Mt purchased and an expected average realised price of $55–56 per ton. If all coal produced and purchased were to be sold, these expectations would yield coal revenue of between $1.54 billion and $1.68 billion. With over 83% of its 2007 production already committed and priced, Alpha’s estimates would appear to be fairly solid.

 

Based on these expectations, Alpha’s best estimate for 2007 would yield coal revenues that are flat compared to the 2006 numbers just reported.

 

According to company chief Michael Quillen, this is entirely on purpose: “Until we see evidence of sustained price improvements, we have put together an operating plan that maintains current production levels.”