Peabody announced its second quarter 2018 operating results, including revenues of $1.31 billion, and income from continuing operations, net of income taxes of $120.0 million. Peabody’s diversified portfolio continues to generate substantial returns, led by 39% margins from the company’s Australian platform, as it capitalizes on continued strength in seaborne metallurgical and thermal coal fundamentals.
Revenues for the second quarter increased 4% over the prior year to $1.31 billion driven by a 20% increase in Australian met and thermal sales volumes, offsetting the impact of lower U.S. volumes and $48.1 million on unrealized long-dated Newcastle hedge losses as the forward price of seaborne thermal coal sharply increased as of the end of the quarter.
Vigorous seaborne thermal demand led to further strengthening in seaborne thermal coal pricing during the quarter, with Newcastle spot pricing reaching highs of approximately $116 per tonne in the second quarter.
Chinese thermal coal imports rose approximately 20%, or 19 million tonnes, through June compared to the prior year on sturdy industrial activity and an approximately 8% increase in thermal power generation driven by favorable weather conditions. In addition, domestic coal production has been unable to keep pace with the increased power generation and industrial demands, along with customer restocking.
India’s domestic coal production has also been unable to keep pace with growing electricity demand, resulting in an approximately 13% increase, or 9 million tonnes, in thermal coal imports through June compared to the prior year. Coal inventories at India’s power plants remain below targeted levels, further supporting the need for additional thermal coal imports.
Through May, Australian exports have remained essentially flat, with Indonesia and U.S. thermal coal exports through May increasing approximately 18 million tonnes and 8 million tonnes, respectively, supporting ongoing strength in seaborne pricing.