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Walter Industries Expects Coal Boom

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By TED JACKOVICS The Tampa Tribune

Published: May 3, 2008

TAMPA - Shares in Walter Industries Inc. rose 7.74 percent Friday after the company reported expectations of record earnings, record coal sales contracts and additional steps that could lead to selling the financing and home building businesses.

"We are confident that our higher coal and coke prices, along with our expanding metallurgical coal production, will lead to record earnings for Walter Industries in 2008," Chairman Michael Tokarz said.

Shares closed Friday at $72.95, up $5.24, on the New York Stock Exchange.
Walter Industries previously said selling or spinning off its financing and home building groups are among its strategic options as the company changes its focus to ventures more profitable than its once-mainstay housing industry.

Officials said Friday that the financing and home building groups would be separated from one another and from Walter Industries' core coal, natural gas and coke sales businesses by year's end. But they gave no indication of the ultimate disposition of the housing industry businesses.

Jim Walter Mortgage Co. no longer will provide financing for Jim Walter Homes' customers, Walter Industries said in its first-quarter report released late Thursday. Current commitments will be honored, including the backlog of homes with signed contracts and those under construction.

It was the lucrative contracts for future coal sales from its high-performing Alabama mines that caught the attention of analysts during Walter Industries' conference call Friday morning. The metallurgical coal is sold primarily to steel manufacturers in Europe and South America.
Walter Industries officials said the company has contracts for 2 million metric tons of coal at $315 per ton and expects to arrange contracts in the next few weeks for another 1.1 million tons at a similar price. In addition, Walter will price 0.6 million metric tons of coal later this year that will be available in the second quarter of 2009.
Walter Industries said coal production costs are expected to range between $45 and $50 per ton for the full year.

"The pricing is just phenomenal," financial analyst Michael Gaugler of Brean Murray Carret and Co. of New York said during Friday's call.

The company said its operating margin per ton of coal would increase from $8 in the first quarter to an estimated $20 to $21 for the second quarter, to $75 to 81 for the third quarter, and $90 to $96 for the fourth quarter.

On Thursday, Walter Industries reported income from continuing operations of $499,000, or 1 cent a share, on $295.7 million in revenue for the quarter ended March 31. That compared with $32.1 million of operating income, or 61 cents a share, on $320.3 million in revenue in the year-ago period.

The first-quarter results included pre-tax charges of $28 million in the financing and home building businesses to cover the February announcement of the restructuring of Jim Walter Homes. Financing and home building lost $21.4 million for the first quarter.

Global prices for metallurgical coke, which Walter produces in Alabama, have risen along with metallurgical coal markets, positioning the company's Sloss Industries coke operation in Alabama as its second highest contributor for operating income.

Reporter Ted Jackovics can be reached at (813) 259-7817 or

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