Walter Energy 2Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“As we look at the market, we continue to see the short-term outlook for hard coking coal pricing under pressure. We are being confronted with low operating levels at most steel mills, oversupply of hard coking coal in the market and an exchange rate, which is favoring Australian supply.”

“In South America, Brazil continues to show reduced production levels compared to 2012. However, most still anticipate an improvement in advance of the World Cup and Olympics. Europe continues to be soft with exception — with the exception of the U.K. which continued to show a steady production improvement, a trend we’ve seen since March”

“I did see where someone said they believed it was the low-vols and mid-vols that we’re in an oversupply situation. I tend to disagree with that. I think the steel mills still require the higher quality coals in order to maintain their coke strength and protect their blast and their coke ovens from the expansion of some of the lower quality coals. So what we’ve seen is we still have a very strong demand of our low- and mid-vol products. So I would tend to disagree with that.”

“Q3, we’ll strive to maintain our cost levels where they are. But it would be possible that they could go up slightly.”

“I think we saw spot pricing got as low as about $125 for the premium coals, and we’ve seen that creep back up in recent days to a little over $130. So while it’s still below the benchmark, we’re seeing it start to move north again.”

“I think the key messages were action-oriented and we’re going to make progress and we’re going to — and move very decisively and quickly.”

“We can only process a certain amount of coal on a monthly basis. So if we try to increase that amount, we would have to add additional shifts at the preparation plant and additional shifts at the mine in order to be able to dispose the additional refuse. And both of those would come with additional costs as well. The lowest cost alternative for us is to just bring that inventory through the process a little more slowly than we had originally anticipated, when prices were a little stronger than what they are.”

“I do think everyone is — as you read through all the reports, everyone is doing everything they can to reduce their costs. So that does move the marginal cost down a bit. But still, you’re going to end up with some of those third and fourth quartile mines just aren’t going to make it. So it’s just — it’s still just a matter of time to where those tons come out of the market.”

“We still have about 2 accounts left open, otherwise we’re probably 96% done [locked up for 3Q].”

“The Q2 price is well above the Q3 price. So I think we’re going to see prices come down in Q3 versus Q2.”

“we view with — liquidity comes from 3 areas or financial flexibility comes from 3 areas: operations, capital markets and asset sales. And we’re focused on all 3. I just pointed that out in the amendment, it doesn’t necessarily mean we’re focused on that one in particular. We’re looking at all alternatives. And we’d like to be aggressive and move decisively, but we’re not going to rule anything out and we’re not pointing to any one in particular at this point.”

“I don’t think you should read too much into the $250 million or as being the number, if I could. If an asset sale is underway and someone bids higher than $250 million, we will take the money. You can be sure of that.”