Alliance Resource Partners: How Did It Miss 1Q16 Estimates?
Shipments by segment
Alliance Resource Partners’ (ARLP) operations are confined to two coal (KOL) producing regions: the Illinois Basin and the Appalachian region. Shipments from the Illinois Basin continued to be a major revenue driver for Alliance Resource Partners. Shipments from the Illinois Basin came in at 5.5 million tons, compared with 7.1 million tons in 1Q15 and 7.8 million tons in 4Q15. The Illinois Basin segment includes the consolidated shipments from the Hamilton mine, previously owned by White Oak. ARLP acquired a complete equity interest in White Oak in July 2015.
Shipments from the Appalachian region also decreased during 1Q16. Shipments from the Appalachian region came in at 1.9 million tons, compared with 2.4 million tons in 1Q15 and 2.2 million tons in 4Q15.
Alliance Resource Partners’ overall shipments
Alliance Resource Partners reported overall shipments for 1Q16 of 7.5 million tons, down from 9.5 million tons for the same period in 2015. It is by far the biggest quarterly drop in overall shipments in the last three years. Also, the shipments decreased by nearly 25% on a QoQ (quarter-over-quarter) basis from 10.0 million tons in 4Q15.
Why the fall?
Total shipments fell by nearly 21.5% year-over-year due to the company’s planned reduction in its coal sales volume in the Illinois Basin and the Appalachian region.
According to company filings, lower shipments from the Illinois Basin were due to the idling of the Onton and Gibson North mines in the sequential quarter. Also, customer deferrals of scheduled shipments during 1Q16 from the company’s River View and Gibson South mines and reduced production at the Hamilton mine resulted in lower shipments from the Illinois Basin segment.
In Appalachia, lower shipments in 1Q16 were primarily due to the planned scale back of production at the Tunnel Ridge and MC Mining operations. According to company filings, customer deferrals and soft coal demand due to a mild winter and excessive customer stockpiles led to a larger inventory in 1Q16.
A mild winter could also affect the 1Q16 shipments of peers Cloud Peak Energy (CLD), Peabody Energy (BTUUQ), Arch Coal (ACIIQ), and Alpha Natural Resources (ANRZQ). In next part of our series, we’ll discuss ARLP’s coal pricing and revenue from its operating segments in 1Q16.
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