Arch Coal Business Analysis

Presented by:Melissa Hanke

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.

Noteworthy Acquisitions

1998:acquired

Black Thunder mine

2004: acquired

Triton Coal Company for $364 million

2009: acquired Rio Tinto’s Jacob Ranch mine

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

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

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 coalProduction of steel

ACI focuses on steam coalPower utilities, steel

producers, industrial facilities

Exports

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.

SWOT Analysis

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

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

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