Macarthur Coal Cuts Profit Forecast on Sales Slump

Macarthur Coal Ltd., the world’s biggest exporter of pulverized coal, cut profit forecast and suspended its dividend as customers deferred shipments, sending its shares down the most on record.Macarthur fell 22 percent after saying profit may be between A$75 million ($50 million) and A$125 million in the six months ending Dec. 31. That’s as much as 53 percent lower than the Brisbane-based company’s forecast last month.A global recession has curbed demand for steel, prompting mills in Asia, Europe and North America to slash purchases of raw materials. ArcelorMittal, the world’s biggest steelmaker, asked to reduce shipments this quarter, Macarthur Coal Chief Executive Officer Nicole Hollows said last month.“We’ve seen a massive and sudden dislocation in demand and the steel mills have more or less pulled up the drawbridges and they don’t want to be taking coal,” Andrew Harrington, a mining analyst at Patersons Securities Ltd., said by phone from Sydney.Macarthur fell 76 cents to A$$2.72 at 12:37 p.m. Sydney time on the Australian stock exchange, the most since it was listed in July 2001 and the lowest in four years.Xstrata Plc today said it will suspend operations and cut 230 workers at a coking coal mine in Australia as demand slumps. BHP Billiton Ltd., the world’s largest coking coal exporter, today also said it won’t be immune to the “uncertain” market. Coking coal and pulverized coal are used in steelmaking.‘Unprecedented’There has been “a sudden and unprecedented reduction in coal sales as a result of postponement of coal shipments by some customers,” Macarthur said in the statement to the Australian stock exchange. “There is considerable uncertainty as to future movements in demand and when recovery will take place.”The company will cut 180 jobs, review projects and may defer developments, the statement said. Macarthur will also suspend its interim dividend and will consider a final dividend at the end of the 2009 fiscal year.Production from its Moorvale and Coppabella mines will be reduced, resulting in a 22 percent cut in its 2009 fiscal year sales forecast to 3.9 million metric tons.“We are acting now to manage cash flow and costs in order to weather the current storm,” Chairman Keith De lacy said in the statement.Production CutsArcelorMittal, owner of a fifth of Macarthur Coal, said Nov. 5 it was cutting output by more than 30 percent, and Japanese rivals including Nippon Steel Corp. have widened production cuts.Posco, which owns a 10 percent stake in Macarthur Coal, yesterday said it may consider output cuts next year. Spokesman Choi Doo Jin today said Posco hadn’t asked to reduce or delay shipments from Macarthur Coal.“Even with the lower profit guidance for the first half of fiscal 2009 they are in a relatively liquid position in terms of cash,” Patersons’ Harrington said. “I don’t see there is any question about the company’s survival. The company is trading at a four-year low so it might represent some decent value.”Goldman Sachs JBWere Pty yesterday cut its forecast for pulverized coal prices to $85 a ton for shipments starting April 1, a 65 percent decline from the record $245 a ton this year. The analysts led by Melbourne-based Neil Goodwill cut their price target for Macarthur 28 percent to A$4.15.