Coal miners are some of the most beaten down stocks this year. And one of the most unfortunate companies among coal miners is Walter Energy, Inc. (NYSE:WLT). The stock is down 71% already. Investors hoped that the second quarter earnings report would show some improvements. This was not the case.
No positive changes so far
Walter Energy, Inc. (NYSE:WLT) has beaten earnings estimates, losing $34.5 million, or $0.55 per share. Revenue was $441 million, down 10%. The company has decreased its met coal sales volume by 12%. The interest expense weighed on the results once again. Walter Energy paid $53 million of interest in the second quarter.
Walter Energy, Inc. (NYSE:WLT)’s management must regret the decision to take that much debt to purchase Western Coal for $3.3 billion back in 2011. Then, the price of coal was rising. Now, it’s way below the levels of 2011 and shows no signs of improvement. Walter Energy, Inc. (NYSE:WLT)’s long-term debt stood at $2.6 billion at the end of the second quarter.
Other market participants confirm that the market remains oversupplied. Arch Coal Inc (NYSE:ACI) and Alpha Natural Resources, Inc. (NYSE:ANR) have stated they see continuing pressure on the prices of both met coal and steam coal. Both companies have finished the second quarter with a loss. Low coal prices and debt burden weighed on the results.
Arch Coal Inc (NYSE:ACI) has accumulated $5 billion of debt, while Alpha Natural Resources, Inc. (NYSE:ANR) owes $3.35 billion. This poses significant risks for both companies. The situation with coal prices has not improved, and investors are getting nervous. Companies struggle to produce meaningful cash flows, and their stocks are under pressure.
Walter Energy, Inc. (NYSE:WLT)’s liquidity has been under the spotlight for some time. The company has finished the quarter with $171 million of cash on hand and $317 million available under the revolving credit agreement. The company stated that it planned asset sales that would bring in $250 million in 9 months. This would ease the short-term pain, but would not cure long-term problems.
Just like other miners, Walter Energy, Inc. (NYSE:WLT) needs higher coal prices. The company can exist with current prices until the big debt repayment comes due. The same is true for both Arch Coal Inc (NYSE:ACI) and Alpha Natural Resources, Inc. (NYSE:ANR). These companies are in a better situation from a liquidity point of view. Arch Coal Inc (NYSE:ACI) finished the second quarter with $900 million of cash and $300 million of borrowing capacity. Alpha Natural Resources, Inc. (NYSE:ANR) ended with $1 billion of cash and $0.9 billion available under the credit facility.
Given the current situation, coal miners will have trouble refinancing their debt if necessary. Walter Energy tried to refinance its debt in June, but gave up the idea just a week after the initial announcement.