The decline of the United States and global economies has had a major negative impact on the coal mining industry. As industrial production wanes so also does the consumption of electricity. And as electric consumption drops, the demand for coal lessens as well.
Hal Quinn, president of the National Mining Association, predicted a 4% drop in the production of coal in the US for 2009. Coal exports are expected to drop by 11% after experiencing a rise of 38% in 2008.
Richmond, Virginia based James River Coal Company (JRCC) reported fourth quarter earnings below analysts’ expectations. The company reported a net loss for the quarter of $33.6 million, or $1.26 per share. Analysts polled by Thomson Reuters had a consensus loss expectation of $.83. The price of coal for the period was $57.66 per ton, compared to $90.13 per ton for the year to date.
James River employs 1681 people in the mining, processing and selling of bituminous, steam and industrial grade coal. The company has underground and above ground coal mines in Kentucky and Indiana.
Company guidance for full year 2009 earnings accompanying the 2008 earnings release projects earnings in the range of $3.30 to $3.80 per share. Analysts had expected guidance of $3.89.
JRCC opened sharply lower on the earnings and guidance releases, dipping below $10 per share after closing the previous session at $11.43. Though recovering somewhat by midday, JRCC is still down over 3.5% for the day.
The 52 week trading range for the stock is $5.05 to $62.83. The stock peaked in May after a meteoric rise from below $15 in February only to slide precipitously to its low in November.
Following the James River earnings and guidance release and the comments from Quinn, the Dow Jones US Coal Index declined by 3.3%. Other coal companies joined James River in seeing their stock prices decline. Arch Coal (ACI) dropped 4.1%, Foundation Coal lost 3.4% and Patriot Coal (PCX) dropped 5%.
James River has a modest $3.4 million of liquidity, including $1.0 million of unused credit lines. The company has a current ratio of .88, and a long term debt to equity ratio of 1.51. Both are well off the average for the industry of a 1.4 current ratio and a debt to equity ratio of .29.
In spite of the weak financial strength ratios, JRCC has a strong buy rating from 3 of the 4 analysts providing coverage, and a hold from the remaining analyst.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
