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Outlook for coal much improved, top producer says

The nation’s coal industry is beginning to regain many of the customers it has lost to natural gas, the world’s biggest private-sector coal producer said this week.

Peabody Energy Corp. said it expects U.S. demand for coal used in electricity production to grow by 50 million to 70 million tons as such thermal coal “has regained signifi- cant market share from natural gas,” which many utilities had been using over the past year or so instead of coal for fuel as a cheaper alternative.

But Peabody said natural gas prices have been significantly higher than a year ago, leading to a 15 percent drop-off in utility use of natural gas as fuel and an 11 percent rise in coal demand over the first half of this year.

Peabody’s earnings are closely watched because the company usually is among the first of the coal sector’s big players to report earnings each quarter. It gives analysts and investors a snapshot of the industry’s health, including an outlook for thermal coal demand used to produce electricity.

Peabody said Tuesday its secondquarter earnings slid 56 percent because of lower pricing, but the results still handily beat Wall Street’s expectations partly because of the company’s continued belttightening.

St. Louis-based Peabody said its net income attributable to common shareholders fell to $90.3 million, or 33 cents per share, for the April-June period. That’s down from $204.7 million, or 75 cents per share, a year earlier.

Revenue fell 13 percent to $1.73 billion from $1.98 billion a year ago.

Analysts polled by FactSet on average expected an adjusted loss of 5 cents per share on higher revenue of $1.82 billion.

Peabody says it expects adjusted diluted earnings per share of between a loss of 16 cents to a profit of 9 cents for the third quarter, during which time analysts expect a loss of 13 cents per share. The company did not offer guidance for the full year.

Peabody, which expects this year’s per-ton U.S. revenues to be 5 to 10 percent lower than last year, left its full-year sales forecast unchanged at 230 million to 250 million tons, including 180 million to 190 million in the U.S. and 33 million to 36 million tons in Australia.

Its shares rose $1.18, or 7.2 percent, to $17.50 in midday trading Monday, but fell slightly to $17.14 by the opening of trading on Wednesday.

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