Arch Coal profit drops as rail repairs cut shipments

Arch Coal Inc., the No. 2 U.S. coal producer, said second- quarter profit slid to about 5 cents a share as rail repairs disrupted shipments from mines in West Virginia and Wyoming.

Rail-related disruptions reduced per-share earnings in the period by 35 cents, St. Louis-based Arch said Friday in a statement. The profit estimate of 5 cents a share excludes costs related to an accounting change. Arch reported earnings of 17 cents a share for last year's second quarter.

Excluding the accounting change, per-share profit for all of 2005 will be 75 cents to $1.25, Arch said. That compares with an average estimate of $1.88 from 15 analysts in a Thomson Financial survey.

Rail repairs by Union Pacific Corp. and Burlington Northern Santa Fe Corp. will reduce shipping capacity from Wyoming's Powder River Basin through the end of this year, Arch Chief Executive Steven F. Leer said in the statement.

"The rail problems were well-known, but we've been hearing a lot more noise about how it might not get better until the end of the year," said James Rollyson, an analyst at Raymond James Financial in Houston who rates Arch shares at outperform and doesn't own any. "I didn't expect them to come in this low."

Arch is scheduled to release its second-quarter earnings report on July 25.

Union Pacific on July 5 said it will cut coal shipments from Wyoming by as much as 20 percent at least until November and possibly into 2006. The rail line leading from the Powder River Basin, the busiest in the U.S., was weakened by record snowfall and rain. Shipments have slowed since May, when there were two derailments.

St. Louis-based Peabody Energy Corp., the largest U.S. coal producer, and Foundation Coal Holdings Inc. also had deliveries cut from mines in the Powder River Basin, Rollyson said. At least 7 million tons of shipments have been curtailed this year because of the rail problems, he said.

"Peabody may be able to make up some of that because they've got the flexibility of a large trading operation," Rollyson said. "Once you get into 2006 and the repairs are done, it's going to be a very positive story for these guys."

Arch said poor rail service cut its second-quarter shipments, mostly from its Black Thunder mine in Wyoming, by more than 4 million tons.

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