CHARLESTON, W.Va. Shares of Consol Energy Inc. fell sharply Thursday after the coal mine operator said its second-quarter profit dipped 34 percent as productivity problems pushed up costs.
Pittsburgh-based Consol said it earned $101 million, or 54 cents per share, in the quarter. Consol, which owns the Emery Deep Mine and Hidden Valley Mine in Utah, earned $153.1 million, or 83 cents per share, in the second quarter of 2007. Last year's second quarter included $59 million in profit from asset sales.
Consol said revenue and other income totaled $1.21 billion in the second quarter, compared with $1.06 billion in the same period last year.
The results fell well short of Wall Street's expectations. Analysts polled by Thomson Financial were expecting Consol to earn 80 cents per share.
Shares of Consol fell $12.64, or 14 percent, to $75.86 in midday trading.
Chief Executive Brett Harvey pinpointed productivity problems that left highly productive longwall mining sections idled for lengthy periods as miners prepared new mining areas for problems in the quarter. In coal mining, lower productivity forces up costs per ton, eating into profits.
"We spend the money and the tons don't come out," Harvey said during a conference call with analysts. "We've seen that come on track in the latter part of the second quarter, but not enough to affect it."
The result was essentially flat production at higher cost. Consol said it produced 16.6 million tons during the quarter, compared with 16.4 million tons in 2007. Operating costs per ton rose to $32.03 from $25.46 a year ago.
Consol said it still expects to produce between 68 million and 72 million tons of coal this year from its mining complexes in Pennsylvania, West Virginia, Virginia, Utah, Kentucky and Ohio.
There were some bright spots.
Consol's 81.7 percent stake in CNX Gas Corp. paid dividends as the Pittsburgh-based natural gas producer produced $64.3 million in second-quarter net income, up from $41.5 million a year ago.
Prices for eastern U.S. coal have more than doubled from a year ago, which helped as well. Harvey said Consol's prices jumped 15 percent between the first and second quarters.
Currently, Consol is seeing 2009 prices ranging from $100 to $110 a ton for lower-quality coal for electricity generation to $265 a ton for high-quality metallurgical coal used to make coke for steel mill blast furnaces, Harvey said.
As a result, Consol is hoping to increase annual metallurgical coal production by 3.5 million to 5 million tons over the next five years, Harvey said. "That's where we're focused right now."