(Reuters) - The head of U.S. coal producer Alpha Natural Resources ANR.N said on Wednesday it was too early to say whether the company’s $7 billion acquisition of Massey Energy last year was a strategic success.
Earlier, Alpha posted a $2.2 billion second-quarter loss in which it took big write-downs on assets including mines it bought from Massey, which was the owner of the Upper Big Branch mine where 29 men died in an explosion in 2010.
During a conference call to discuss the results, one Wall Street analyst asked Chief Executive Officer Kevin Crutchfield if the price Alpha paid for some acquisitions, particularly Massey, which led to the write-downs, was too high given the recent slump in coal prices.
“Clearly, the world has changed from the time we signed the deal in January of 2011 to now, and that is what is reflective, I think, in these accounting related but noncash types of adjustments,” Crutchfield said.
“I think it is too soon to say whether the strategic merits of the transaction will pay off.”
This year, prices for power-generating thermal coal have slumped about 20 percent and there has been a recent drop in steelmaking metallurgical coal prices.
“We are a year and a month or maybe two months into the transaction, and I don’t think you can judge a transaction of this size, scale, scope over that short period of time,” said Crutchfield.
“One thing we’ve seen in this industry ... is it has become much more volatile, and it changes rapidly. And while we are in a trough to some extent right now, we believe that will change in time, as well.”
Alpha’s results included a goodwill impairment charge of $1.5 billion, and another $1 billion for asset impairment, restructuring charges and expenses related to the Upper Big Branch mine.
Alpha’s stock was down 5 percent at $6.55 in midday trading on the New York Stock Exchange.
Reporting By Steve James; Editing by Leslie Gevirtz