U.S. coal producer Peabody Energy rolled back its 2010 profit forecast Friday, citing flood damage to its lucrative Australian coal mines, where nearly a third of its revenue is generated.
The flooding, which has paralyzed the world's largest coal exporting country, threatens to soak Peabody's 2011 results and submerge the company's plans to substantially increase Australian production by 2014.
Peabody now expects 2010 earnings before interest, taxes, depreciation and amortization of about $1.8 billion.
That is the midpoint of its full-year target of $1.7 billion to $1.9 billion issued in July, and one that Peabody had bullishly predicted in October could rise to a range between $1.85 billion to $1.9 billion.
Australian coal is the most profitable product Peabody sells, with gross margins more than double those of the next-closest product, U.S. Midwestern coal.
In 2009, Peabody's Australia operations brought in 28 percent of sales and 34 percent of EBITDA.
Peabody's chief executive, Gregory Boyce, said in early 2010 that Australian expansion remained a near-term priority for his company, with major coal customers located in fast-growing Asian markets.
A company spokesman declined to discuss if the floods would affect 2011 results but said Peabody would provide an update during its quarterly conference call on Jan. 25.
Once the floodwaters recede, Peabody will begin pumping out the mines. The coal should not be damaged by the water, a spokesman said.
MONTHS OF DISRUPTION
Australia's flood-stricken coal industry may be disrupted for months after key rail and road links were washed away, authorities said.
The floods have swamped mines in Queensland state, paralyzing operations that produce 35 percent of Australia's estimated 259 million tonnes (metric tons) of exportable coal. Australia accounts for two-thirds of global exports of coking-coal, needed to make steel; China is among the largest customers.
St. Louis-based Peabody has five mines in Queensland, including one in Wilkie Creek in the heavily damaged southern part of the state.
The company also has five mines in New South Wales, Australia's most-populated state, just south of Queensland. Those mines are not in the flood zone.
By comparison, Peabody has 20 mines in the United States, with locations also in England, China and Venezuela.
Last month, Peabody invoked a force majeure clause in its contracts that allows it to halt shipments in the event of extraordinary circumstances.
Shares of Peabody rose 0.4 percent to $61.83. The stock has traded between $34.89 and $66.07 in the past 52 weeks.
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