Coal giant Peabody's 3Q net income rises

ST. LOUIS (AP) - Coal-mining giant Peabody Energy Corp. said Tuesday that its third-quarter earnings climbed 22 percent and demand for coal is still rising for power generation in Asia and Europe.

Separately, Peabody said steel maker ArcelorMittal has pulled out of their joint bid to buy Australia's Macarthur Coal Ltd. for about $5 billion, and will sell its interest to Peabody.

Peabody shares dropped more than 10 percent in morning trading before recovering most of the loss by midday. Lucas Pipes, an analyst with Brean Murray Carret & Co., said investors were rattled by the prospect that the company might issue more stock to swing the Macarthur deal without ArcelorMittal.

On a conference call with analysts, Peabody executives said they were unlikely to issue new stock or debt that converts to stock. They also said the deal would add to Peabody earnings within a year, but offered no figures.

Peabody executives said they would give more details in three months, by which time they expect the acquisition to have closed. They also said they expected to remain on good terms with ArcelorMittal, a major customer for Peabody's coking coal.

Peabody shares were down 84 cents, or 2.1 percent, to $40.10 in afternoon trading after sinking as low as $36.57 earlier in the day.

The St. Louis-based company said net income rose to $274.1 million, or $1 per share, for the three months ended Sept. 30. That's up from $224.1 million, or 83 cents per share, a year earlier.

The company said earnings after special items totaled 87 cents per share. Analysts surveyed by FactSet expected adjusted earnings of 90 cents per share.

Revenue rose 9 percent to $2.04 billion. Analysts expected $1.99 billion.

ArcelorMittal's announcement that it was pulling out of the joint bid for Macarthur Coal came just one day after the companies said that they had won over a majority of Macarthur shares.

Peabody Chairman and CEO Gregory H. Boyce said Tuesday that while his company expected a partnership with Europe's ArcelorMittal, "We have always preferred a larger ownership." He said that his company had teamed with ArcelorMittal to improve the chances of winning control of Macarthur, which has been achieved. Now, going it alone will speed up Peabody's ability to cut costs and benefit from the acquisition, he said.

Peabody said it is getting a new loan of up to $1 billion and will use cash and borrowing to pay for Macarthur.

The company left unchanged its forecast of full-year adjusted earnings between $3.70 and $4.15 per share. Analysts expect $4.01 per share.

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