Peabody 2nd-quarter earnings increase

Twentymile owner reports 38 percent profit increase

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Coal-mining Peabody Energy Corp. reported Tuesday its second-quarter profit surged 38 percent on higher prices and improved demand for steelmaking coal.

The world’s biggest private-sector coal producer predicted even stronger results for the rest of 2011, as it undertakes what it called its biggest global expansion in its 128-year history.

Peabody now expects full-year earnings to be $4.20 to $4.60 per share — up from $3.50 to $4.50 per share from its April forecast. The St. Louis-based company predicts third-quarter earnings of $1.05 to $1.25 per share.

Peabody said its net income attributable to common shareholders was $284.8 million, or $1.05 cents per share, in the April-June period. That’s up from $206.2 million, or 76 cents, a year earlier.

Revenue rose 21 percent to $2.01 billion from $1.66 billion. On average, analysts polled by FactSet expected Peabody to earn $1.04 per share on revenue of $2.02 billion.

Shares of Peabody rose 63 cents to $60.55 in afternoon trading.

Peabody’s latest showing comes at a time when it is aggressively trying to bolster its global footprint in Australia and Asia. That’s underscored by its latest push to buy Australia-based Macarthur Coal Ltd., this time teaming with steelmaker ArcelorMittal in a $5 billion bid.

Adding Macarthur — a major producer of pulverized coal used by steel producers — would broaden Peabody’s expanding operations in Australia. Its mines there produce much of the coal sent to customers in the Asia-Pacific region, notably China and India, and have been a key revenue driver.

Macarthur last year rebuffed a $3.4 billion offer from Peabody. The new bid comes at a curious time: The government has proposed a new tax expected to take effect a year from now on the country’s worst polluters that some fear could cause the collapse of the country’s lucrative coal industry. This poses a potentially risky — and costly — gambit for Peabody.

Peabody’s chairman and chief executive told analysts during a conference call Tuesday that the possible impacts of such a tax on Peabody and the rest of Australia’s coal industry remain unclear. Still, Gregory Boyce said that Peabody has concluded that consolidating in Australia, including an acquisition of Macarthur, would be the best way to mitigate the tax’s potential fallout.

Peabody also has signed an agreement to develop a huge Chinese surface mine expected to produce 50 million tons of coal a year for decades. Boyce suggested the need for such a mine appeared clear for coal-craving China, calling the country “a cornerstone of growth,” where electricity generation has risen 14 percent and steel output is up 10 percent so far this year.

Those deals, Boyce told analysts, help “represent the new shape of our company.”

“With a tight supply-demand picture and favorable long-term market outlook, Peabody is in the midst of the largest global growth program in the company’s history,” Boyce added. He said Peabody will expand “in the regions that serve the fastest-growing markets through organic growth, joint ventures and acquisitions.”

Jeremy Sussman, an analyst with Brean Murray, Carret & Co., told clients in a research note Tuesday that while Peabody’s U.S. and Australian operations were in line with his firm’s expectations, “the bottom line is that with another solid quarter, and a sizable guidance raise, we’d expect Peabody to be fairly strong.”

Peabody’s previous full-year outlook was sharply below Wall Street’s expectations at the time of $5.03 per share. Analysts’ current forecast is for $4.42 per share.

Peabody left its 2011 production outlook unchanged at 245 million to 265 million tons of coal, including 28 million to 30 million tons from Australia and 195 million to 205 million tons from the U.S.

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