Boston, MA 10/29/2013 (wallstreetpr) – Alpha Natural Resources Inc. (NYSE:ANR) is facing an uncertain future as changing trends in fuels has left the company far behind. Alpha operates 26 coal preparation plants and 107 mines in the U.S. The company was profiting on the need for ‘clean’ coal required by power utilities and metallurgical companies. Introduction of scrubbers lead to these companies shift to any coal that was cheap. Extension of natural gas as a fuel and the low prices made them change over to natural gas as fuel. Coal was being associated with causing more environmental damage than other fossil fuels. Labor costs are also rising in the labor intensive coal industry. Coal industry is facing a severe test in the U.S. with an estimated 150 mines closing down in the last couple of years.
Alpha has been losing money in the last seven quarters. The company also expects the weak economic conditions and lower natural gas prices to remain for some time to come. Demand for metallurgical coal can only increase when demand for the metals increases. The economic condition is not stable globally, the federal government may have avoided a financial default for now, but efforts for a more permanent solution have not reached anywhere. Other countries are also reeling under recession; Europe is yet to recover fully. The company understands that the only way to survive is by reducing costs and waiting out for this tough period to pass. The company still has $1.9 billion in reserves. Alpha has tightened its belts further by reducing capital expenditure. Maturity of long term debt is due in 2015 only. It aims to reduce costs by 3%. Sales of non-core assets will also yield some much needed cash.
These steps border on desperation. Investors will have to think carefully before making any fresh investments though the shares are trading at a very lucrative price of $6.59. They have not yet tested the bottom.
