Peabody Energy announced that second quarter 2015 adjusted EBITDA and adjusted EPS are now expected to be below the original targeted range due to weather-related shipment issues in the Southern Powder River Basin and lower seaborne coal pricing.
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Peabody expects a timing-related impact of approximately $40 million in the second quarter as a result of a series of substantial rain and flash flooding events in the Southern Powder River Basin primarily in June that reduced production by 5 to 5.5 million tons.
Peabody has largely resumed normal production levels, and is scheduling to make up the deferred shipments in the third and fourth quarters.
The company was also impacted by approximately $20 million from the effects of lower pricing on Australian metallurgical coal, with approximately half related to spot coal sales during the quarter and half related to reduced coal inventory valuation due to benchmark third quarter settlements.
Spot metallurgical coal prices declined 15 percent during the quarter before increasing in recent weeks.
Regarding other factors expected to affect second quarter results, in early June Peabody announced a reduction of approximately 250 positions, or 25 percent of its corporate and regional staff, with expected annual savings of $40 to $45 million when fully implemented later this year.
In addition, the company has initiated actions to reduce approximately 250 employee and contractor positions at multiple metallurgical and thermal coal mines in Australia. These actions are aimed at increasing productivity, lowering costs and improving cash flows, while reducing metallurgical coal volumes for sales when markets improve.
The company plans to provide additional details regarding the future benefits of these programs and any targets in its second quarter earnings release scheduled for Tuesday, July 28.
Peabody expects to incur an estimated $20 to $25 million in second quarter 2015 charges related to these activities, and these charges were not included in the company's previous financial targets.
Approximately half of the charges are associated with the previously announced corporate and regional staff reductions, with the other half related to Australia mine site-related workforce reductions. ■