Arch Coal Business Analysis. Presented by: Melissa Hanke. Company Background. Arch Mineral Corporation was established in 1969 1997- merged with Ashland Coal to from Arch Coal (ACI) Merger created leading low-sulfur coal producer in eastern U.S. Noteworthy Acquisitions.
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Arch Coal Business Analysis Presented by: Melissa Hanke
Company Background • Arch Mineral Corporation was established in 1969 • 1997- merged with Ashland Coal to from Arch Coal (ACI) • Merger created leading low-sulfur coal producer in eastern U.S.
Business Description • Arch Coal Inc. contributes 15% of U.S. coal supply • Among the top 5 leading coal producers in U.S. • 46 active mines in top regions • Powder River Basin • Appalachia • Western Bituminous • Illinois
Industry Description • Obtaining anthracite or lignite coal • Underground or surface mining • Coal industry in maturity stage • Slowing demand for product • Facing direct competition from other industries • Price competition • Stage before decline • Dying industry
New York Times Article “More than 100 of the 500 or so coal-burning power plants in the United States are expected to be shut down in the next few years. While coal still provides about a third of the nation's power, just four years ago it was providing nearly half” (Lipton, 2012).
Product Mix & Market • Steam coal (thermal coal) • Generate electricity • Metallurgical coal • Production of steel • ACI focuses on steam coal • Power utilities, steel producers, industrial facilities • Exports
Competitive Environment • In comparison with their main competitors, ACI is not among the top three financially. • Lowest market capitalization at $1.14 billion dollars • compared to CONSOL Energy Corporation with a market cap of $7.66 • Lowest revenue at $4.09 billion compared to Peabody Energy Corporation’s $8.08 billion.
Financial Analysis • Revenue has barely increased over the last three years • Negative net profit • Price per share has dramatically decreased • Beta stock at 2.5 highly volatile • Negative P/E ratio
Conclusion • ACI is a great company that is a part of a dying industry • Due to renewable energy • Financials on the downward slope • Decreased over past three years
Recommendations • Arch Coal Inc. is not an attractive acquisition for a company like CCL that has a lot of cash since ACI’s finances are in disarray • CCL should invest in a company that is part of the renewable energy industry