Coal prices remained elevated because of the global energy shortage and rising natural gas prices. Moreover, as Western countries abandoned Russian coal shipments, the supply disruptions have caused the coal prices to surge. Newcastle coal futures, the primary traded benchmark for coal in Asia, is currently trading around $400 per tonne, just $30 away from the record high.
Furthermore, surging natural gas prices relative to coal increased demand for coal-fired power generation. The energy-dependent European countries, including Germany, Austria, and the Netherlands, are considering switching back to coal to fill the gaps in the supply chain.
According to a report by The Business Research Company, the global coal market is expected to reach $900.78 billion in 2026, growing at a CAGR of 8.7%. The strong coal demand, constrained energy supplies, and high pricing environment should boost the profitability and growth of coal companies in the United States.
Arch Resources, Inc. (ARCH)
ARCH produces and sells thermal and metallurgical coal from surface and underground mines. The company sells its products to industrial, steel, and utility producers in the U.S., Europe, Asia, Central, and South America, and Africa. ARCH operates more than seven active mines.
On May 25, ARCH closed its previously announced privately negotiated exchanges of $125.20 million principal amount of its 5.25% senior convertible notes due 2025 for $130.10 million in cash and approximately 2.6 million shares of ARCH common stock. As a result, the company has reduced its indebtedness and eliminated future interest payments.
“With these transactions, Arch has strengthened and simplified its capital structure in a way that should drive significant long-term value for our shareholders,” said Paul A. Lang, ARCH’s CEO and President.
ARCH’s revenues increased 142.8% year-over-year to $867.94 million in the fiscal 2022 first quarter ended March 31, 2022. The company’s adjusted EBITDA rose 938.9% year-over-year to $320.98 million. In addition, its net income and earnings per share came in at $271.87 million and $12.89, registering increases of 4,599.7% and 3,322.5% from the prior-year period, respectively.
Analysts expect ARCH’s revenue for the fiscal 2022 second quarter ended June 2022 to come in at $1.06 billion, representing a 135.5% rise from the same period in 2021. Also, Street expects the company’s EPS for the to-be-reported quarter to come in at $23.41, representing a 1,282.7% increase year-over-year.
The company has an impressive revenue and earnings surprise history as it has surpassed the consensus revenue estimates in each of the trailing four quarters and the consensus EPS estimates in three of the trailing four quarters.