ST. LOUIS — Arch Coal Inc., which has several mines in Eastern Kentucky, said Tuesday that "severe weakness" in the U.S. market for coal used to generate electricity cut sharply into its first-quarter earnings and forced it to curtail production for the year.
The St. Louis-based company's results fell well short of Wall Street's expectations.
In the January-March quarter, Arch Coal's net income totaled $1.2 million, or 1 cent a share, compared with $55.6 million, or 34 cents a share, a year ago.
Revenue was $1.04 billion, up 19 percent from $872.9 million in the 2011 quarter.
After excluding certain one-time items, Arch reported an adjusted loss of 4 cents per diluted share in the recent quarter.
Analysts surveyed by FactSet expected 16 cents a share on revenue of $1.12 billion.
Arch Coal blamed the lower earnings on a U.S. market that appears unsettled, at least for now. The mild winter reduced demand for electricity and heating, which helped push down natural gas prices. A number of power plants have switched to gas from coal to generate power, resulting in what Arch called "unprecedented" stockpiles that reduced demand.
Arch said that U.S. coal consumption for electrical generation could drop by at least 75 million tons this year, so it is paring its production by 25 million tons over 2012. The company's president and CEO, John Eaves, said it's part of a "comprehensive strategy to address the current market environment."
"The severe weakness in U.S. thermal coal markets impacted our first-quarter results and, consequently, we are resetting our 2012 expectations," Eaves said in a statement. "While lower planned volumes will have predictable consequences on our near-term financial results, we believe we are taking the right steps now to position Arch for success as coal markets recover."
Arch trimmed its discretionary capital expenditures by $45 million, to a range of $410 million to $440 million this year, as it evaluates future spending plans. That might include delaying thermal coal replacement and expansion projects.
"The U.S. coal industry is in the midst of a restructuring that will cause some players to exit the market and others, like Arch, to pare back operations until market conditions improve," Eaves said.
In Kentucky, Arch operates mines in Letcher, Martin, Pike, Perry, Breathitt, Knott and Harlan counties.