Cloud Peak Praises Trump—Then Gets Grilled on His Trade War
U.S. coal miner Cloud Peak Energy Inc. is feeling the full effect of President Donald Trump’s agenda—both the good and the bad.
Chief Executive Officer Colin Marshall spent much of his opening remarks on the company’s first-quarter earnings call Thursday praising Trump’s pro-fossil fuel agenda. He applauded him for lifting a ban on federal coal leases, rolling back regulations and voicing support for America’s shrinking number of coal-fired power plants.
And then he started taking questions. Analysts at BMO Capital Markets and Stifel Nicolaus & Co. were among those who grilled the Gillette, Wyoming-based company on Trump’s trade policy and the unintended consequences it may have on the coal Cloud Peak exports from Canada’s West Coast. Just a day earlier, British Columbia Premier Christy Clark threatened to ban the U.S. from shipping thermal coal out of the province’s ports in retaliation for Trump imposing duties on Canada’s softwood lumber imports.
While some of Trump’s energy policies have benefited America’s ailing coal miners—an industry he promised to revive during his campaign—the trade war with Canada underscores how other parts of his agenda threaten to hurt their bottom line. Such an export ban would particularly affect Cloud Peak, which has plans to ship 5 million tons of coal this year through British Columbia to Asian customers.
“There’s a lot of things going on with the U.S. and Canada, and this is one small part of it,” Marshall said in response to one of the analysts’ questions. “Let’s see how this one plays out.”
If Cloud Peak can’t export coal, it’ll become “one of the most expensive names in our coverage universe,” Lucas Pipes, a coal analyst at FBR Capital Markets, said in a note to clients late Wednesday. Wall Street has already been punishing the stock. Shares have plunged 10 percent in regular trading since Wednesday, when Clark sent an open letter to Canada Prime Minister Justin Trudeau calling for a ban.
Through March 31, Cloud Peak had only exported 500,000 tons for the year, in part because of weather-related rail disruptions in the Pacific Northwest. But the company’s contracted 3.3 million tons of Asian export sales to be delivered in 2017 and continues to contract more, Marshall said on the call.
Shares tumbled as much as 18 percent in after-hours trading after closing at $3.53 Thursday.
Marshall pointed out during Thursday’s call that no coal-laden freight trains have been turned back at the border yet and that Westshore Terminals Investment Corp.—owner of the export terminal that Cloud Peak uses—voiced strong opposition to the British Columbia premier’s calls. And he urged patience.
“Guys, if you read the letter, it was a request,” Marshall said. “We’ve got a long way for this one to run.”
Cloud Peak reported a first-quarter loss of 30 cents a share, missing the average analyst estimate of a 2.9-cent loss based on data compiled by Bloomberg. The company reported earnings of $20.4 million before interest, taxes, depreciation and amortization. That compares with the $27.3 million average of eight analysts’ estimates.
Follow us on social media: