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Big 2019 earnings miss for Consol Energy

US fossil fuels producer Consol Energy says headline profit for the December quarter has plunged 62% year-on-year on lower revenues, coal sales and realised pricing, causing its New York-quoted equity to dive 27% to a new 12-month low.
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Consol Energy has reported 62% lower headline profit for the December quarter as market headwinds mount

The Canonsburg, Pennsylvania-based company has missed average Wall Street analyst profit forecasts for the period by US7c per share as adjusted earnings came in at $17.4 million, or 54c per share, compared with a more palatable profit of $46 million, or $1.41 per share, a year earlier.

Revenue for the quarter fell 10% compared with a year earlier at $342.6 million, as coal sales dipped 13% in the period.

CEO Jimmy Brock framed 2019 "as quite a challenging year", given weakening commodity and capital markets, which led to several bankruptcies in the coal space.

While US coal production is estimated to have declined by 9% year-on-year, the company's Pennsylvania Mining Complex produced and sold 27.3 million tons in 2019, which was mainly unchanged from the record production and sales levels set in 2018.

However, the company strategically sought to build contracted coal volumes early in the cycle and currently has about 95% contracted for 2020 and 43% contracted for 2021, assuming the midpoint of the coal sales volume guidance range of 24.5-26.5Mt for 2020.

Consol maintained its coal production guidance despite substantially weaker market conditions, reduced debt by about 20% and improved liquidity through refinancing efforts in 2019. But Moody's Investors Service lead coal analyst Benjamin Nelson cautioned the company could expect a cash flow crunch to come later this year.

"We expect that lower thermal coal pricing will cause EBITDA to fall by more than 25% and meaningfully slow the company's ongoing debt reduction in 2020," he said in a statement to Mining Journal.

"We will be very focused on the company's ability to maintain good liquidity during a very difficult operating environment for the coal industry."

Rival Peabody Energy said last week it was taking a series of operational actions and adopting more conservative financial policies, including reducing capital spending, suspending the dividend and eliminating share repurchases to better weather lower prices across all business segments.

Conversely, Arch Coal announced an 11% increase in its quarterly cash dividend despite mounting coal market headwinds, which had prompted it to trim its sales guidance for 2020.

Consol shares (Nasdaq:CEIX) shed 27% of its value on Tuesday to a new 12-month low at $7.00 per share, giving it a market value of $203 million. Less than 12 months ago the shares traded nearly 76% higher at $39.00.