The Maryland company’s net income decreased to $US24.6 million quarter to quarter from $31.3 million. Revenue also dropped slightly, to $394.9 million from $395.3 million during the same quarter in 2006.
Foundation attributed much of the fall to special circumstances, including a one-time collection of expenses associated with the closure of the Wabash mine in Illinois and $2.2 million to initial employee termination expenses.
Company chairman James Roberts focused on the positive in Foundation’s public results call last week: “Our solid first-quarter results reflect improved sales realisations at all operating segments, 3.5 percent lower overall cost of coal sales per ton, and record coal shipments from our combined operations."
However, he did note – much like other operators as of late – that a soft market had affected performance, saying that the company “committed a significant amount of its 2007 production during the early and middle part of 2006, when the coal market was stronger than it is today”.
He continued: “Our market strategy has afforded us a high degree of top-line visibility, and while we are optimistic that market fundamentals will improve in the future, our ability to meet 2007 financial targets is not entirely dependent on the timing of the market rebound. Moreover, we are not in a position of having to make significant reductions in production given our highly contracted position.”
Wabash was a top discussion topic, with officials outlining the impetus for its closure.
“The operation had become economically unviable as a result of a combination of factors, including aged infrastructure, softening market conditions and outlook, and the prospect of a new higher-cost labour contract with the United Mine Workers of America (UMWA), which represented the hourly workforce at the mine,” Foundation said.
“The company would not sign the 2007 National Bituminous Coal Wage Agreement for Wabash, and consequently UMWA workers walked off the job at Wabash and the Cumberland and Emerald mines in Pennsylvania on April 4, 2007.
“The strike continued until April 12, 2007, when the parties reached agreement on the terms of separate new labour contracts at the Pennsylvania mines and the effects of closure at Wabash. The majority of costs related to the closure of Wabash and the strike in Pennsylvania will be reflected in the second-quarter financials.”
Looking forward, Foundation said that the idling of its Illinois longwall had no effect on its guidance for the year. Further, its production outlook for 2007-2010 has already been adjusted to account for the change.
