2/1/2011 Walter Energy - Valentine's Day Favorite?
We are looking forward to Walter Energy’s (WLT) earnings expected to come out February 14th, Valentine’s Day. Having spent time tossing away any non-energy holdings, this company is focused on energy and is expected to have stellar returns. While we like this company in the short-term because of client base, recent commodity price increases, and good products — long-term we has qualms that the company could be put in a position of not being able to deliver it’s products to market. The Mobile Alabama port is used extensively by this company and if something occurs at this port (such as a hurricane) what would happen to day-to-day operations of the company. The company also appears to rely on a certain railroad to bring product to the waterways. In addition (yes, there is more), operations are based primarily in one state and all the operations could be subject to the same weather, environmental, and regulatory issues. Having operations all together could be a “good thing” when it comes to managing. But, we now diverge too much from the primary subject…. Mobile Alabama port and waterway.
While touring through the 10k, it doesn’t appear that any provisions have been made for alternate travel paths for product although the report does mention that this is a problem. This is a big issue that needs resolving for this company to move forward. Disruptions in delivery of product could cause the most loyal customers to look elsewhere for product. It doesn’t matter how good the product is if it can’t be delivered.
All told, a thunbs up for this company - they have made all the good moves. Let’s see if they can deliver a “contingency plan” for alternate travel.