Inside Cloud Peak Energy’s Missed Adjusted EBITDA Estimate for 1Q16
Cloud Peak Energy's Not-So-Peak 1Q16 Earnings
Cloud Peak Energy’s cash margins
A coal company’s cash margin is the difference between its realized price per ton sold and the average cost of product sold per ton. Thus, the cash margin represents the cash generated per ton of product sold.
Cloud Peak Energy (CLD) reported significantly lower cash margins for 1Q16. In 1Q16, the company’s cash margin came in at $1.50 per ton sold, as compared to $3.03 per ton sold in 1Q15 and $3.18 per ton sold in 4Q15. As discussed in the previous part of this series, this difference is primarily due to lower-than-expected shipments, accompanied by a higher average cost per ton of coal sold.
Adjusted EBITDA
Cloud Peak Energy’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 1Q16 came in at -$1.3 million, as compared to the analyst expectation of $19.2 million. Cloud Peak Energy reported an EBITDA value of $39.4 million in 1Q15 and $34.7 million in 4Q15. This deviation from the analyst expectation is primarily due to the increase in cost per ton of product sold and lower revenues across the operating segments.
Net adjusted income
Cloud Peak Energy’s (CLD) reported a net adjusted loss of $32.7 million for 1Q16, as compared to analysts’ expectations of a net adjusted loss of $11.3 million. The company reported an adjusted net loss of $1.6 million for 1Q15.
Meanwhile, the continued downturn in the commodity market could have a significant impact on the future margins of Cloud Peak Energy and peers like Arch Coal (ACIIQ), Alpha Natural Resources (ANRZQ), and Peabody Energy (BTUUQ). But low-leveraged and pure-play PRB coal (KOL) producers such as Cloud Peak Energy could stand out in this scenario.
Now let’s look at Cloud Peak Energy’s leverage and liquidity position.
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