The news comes despite a productive December quarter with total sales of 1.23 million tonnes, up 26.4% from the same period in 2007.

Macarthur had $US291.28 million in foreign exchange contracts covering January to June this year at a set rate of one Australian dollar priced at US90.33c.

The Aussie dollar has fallen more than 20c from that rate, with Macarthur expecting an unrealised loss of $97.96 million based on the rate of one Australian dollar yielding US69.28c as of December 31.

The losses exceed the $48 million slated for “potential negative hedge accounting adjustments” flagged by Macarthur in its mid-December profit guidance announcement.

Macarthur said the loss from the hedging contracts was expected to be realised on receipt of US dollar sales revenue.

Given that Macarthur says it is company policy to undertake hedging arrangements and one Australian dollar is currently worth some US66.47c, similar book adjustments could strike again.

Despite cutting 180 jobs last month, Macarthur’s Coppabella and Moorvales mines produced 1.27Mt of ROM coal during the December quarter.

As part of a company cost-cutting spree, two large excavators and associated trucks were removed from service in late December to lower production in tune with lower expected sales.

Macarthur said the electric rope and dragline would mine overburden and uncover coal while a small excavator would continue to mine coal.

At Moorvale a number of Leighton employees and contractors were cut to meet lower production needs.

Two large excavators and associated trucks were shut down, with Macarthur using the two remaining excavators and truck fleets to continue operations.

As previously announced in mid-December, the revised profit guidance for the first half of the current financial year was cut down to a range of $75-125 million from earlier guidance of $150-165 million.

Macarthur said the outlook was cut due to lower than expected sales in December.

“The wide range in profit guidance is due to uncertainty about the accounting treatment of the currency hedge effectiveness for December 2008 and March 2009 quarters,” Macarthur said.

The company added that coal sales were also reduced from 5Mt to 3.9Mt in the current financial year.

“The sales mix will also change as thermal coal sales increase and LV PCI coal sales reduce,” Macarthur said.

As the ongoing financial crisis started to kick in strongly, Macarthur said a number of key customers in late November and December advised the company of lower shipments for its pulverised coal injection coal for the rest of the quarter and into the March quarter.

“Where possible, however, the company has increased sales of alternative products in an effort to offset the lower PCI sales,” Macarthur said.

“Thermal coal sales represented 22 per cent of total sales for the quarter.”

On markets, Macarthur says a high level of uncertainty regarding the outlook for steel demand this year still exists and Japanese and Korean steel producers have announced a further 15-20% reduction for the remainder of the contract year.

“While the imperative to maintain coke oven operation has maintained demand for coking coal, albeit at reduced levels, the demand for PCI coals is being more heavily impacted as steelmakers reduce their injections of PCI coal into the blast furnaces,” Macarthur said.