Despite Posting Profit, Foundation Coal Falls

LINTHICUM HEIGHTS, MD. ( TheStreet) -- While the profit of its competitors fell victim to coal's slumping demand, Foundation Coal ( FCL) managed to swing to a profit, thanks to some cost-cutting moves and higher prices.

On Monday, Foundation said its total sales dipped slightly in the second quarter, to $404.7 million from $411.9 million in the year-earlier period. Coal revenues, in particular, fell to $399 million from $404.8 million, while coal shipments dropped to 16.4 million tons from 17 million tons. But Foundation was able to offset that by slashing the cost of coal sales by 15% in the quarter and increasing price realizations during the quarter.

Earnings for the company landed at $30.7 million, or 67 cents a share, compared to a loss of $4.4 million, or 10 cents, in the year-earlier period.

The results also included $4.8 million worth of expenses related to Alpha Natural Resources's ( ANR) plans to buy Foundation. On Friday, stockholders will vote on Foundation's then-announced $1.4 billion, all-stock sale. If approved, the deal, according to the press release, will produce the third largest coal producer in the U.S., with the transaction likely to close just after the vote.

On average, analysts polled by Thomson Reuters expected the coal supplier to produce earnings at 71 cents a share, along with revenues of $445.2 million. Typically, estimates exclude one-time items.

Earlier today, Alpha said its earnings fell 77% because of a demand drop fueled by cutbacks in steel and power production.

While noting slowness in power generation and bloated coal stockpiles, looking ahead, Foundation said in a press release that the domestic outlook for coal was "beginning to improve slowly." Internationally, the company noted strong demand for coal imports, particularly in India and China.

Shares of Foundation and Alpha were down by more than 6% each in the morning.

--Reported by Sung Moss in New York City.

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