arch coal business analysis
DESCRIPTION
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. - PowerPoint PPT PresentationTRANSCRIPT
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Arch Coal Business Analysis
Presented by:Melissa Hanke
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Company BackgroundArch Mineral
Corporation was established in 19691997- merged
with Ashland Coal to from Arch Coal (ACI)
Merger created leading low-sulfur coal producer in eastern U.S.
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Noteworthy Acquisitions
1998:acquired
Black Thunder mine
2004: acquired
Triton Coal Company for $364 million
2009: acquired Rio Tinto’s Jacob Ranch mine
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Business DescriptionArch Coal Inc. contributes 15% of U.S. coal supplyAmong the top 5 leading coal producers in U.S.46 active mines in top regions
Powder River BasinAppalachiaWestern Bituminous Illinois
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Industry DescriptionObtaining anthracite or
lignite coalUnderground or surface
mining
Coal industry in maturity stageSlowing demand for productFacing direct competition
from other industriesPrice competitionStage before decline
Dying industry
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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).
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Product Mix & Market
Steam coal (thermal coal)Generate electricity
Metallurgical coalProduction of steel
ACI focuses on steam coalPower utilities, steel
producers, industrial facilities
Exports
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Competitive EnvironmentIn 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.
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SWOT Analysis
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Financial AnalysisRevenue has barely
increased over the last three years
Negative net profitPrice per share has
dramatically decreasedBeta stock at 2.5 highly
volatile
Negative P/E ratio
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ConclusionACI is a great company
that is a part of a dying industryDue to renewable energy
Financials on the downward slopeDecreased over past
three years
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RecommendationsArch 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