The St. Louis-based company, one of the nation's biggest coal producers, raised its earnings forecast for 2008, citing what Arch's top executive called "our confidence in coal market fundamentals and in the company's future growth prospects."

Company shares jumped 10 percent, or $5.09, to $56.03 in midday trading.

Arch reported net income of $113 million, or 78 cents per share in the latest April-through-June period. That compared with $37.6 million, or 26 cents per share, during the same period last year, in which Arch's profit dove 46 percent after it reined in production amid a softer market.

Revenue rose to $785.1 million, from $598.7 million in last year's second quarter, propelled by higher sales prices in every one of its operating regions.

Analysts surveyed by Thomson Financial expected earnings per share of 64 cents and revenue of $737.1 million.

Arch said it now expects profits of $2.50 to $2.85 per share. Just three months ago, the company predicted it would earn $2.40 to $2.80 per share, up from its previous prediction of $2 to $2.50 per share.

"We expect 2008 to be a record year for Arch," Steven Leer, Arch's chairman and chief executive, told investors during a conference call. "Our tighter and stronger guidance is indicative of our confidence in the coal market fundamentals and in our ability to capitalize on these strong market trends.

The company sold 34.4 million tons of coal during the quarter, compared with 33.3 million tons during the same period last year. Each ton Arch sold fetched on average $21.04, up from $16.42 a year ago and $18.49 over this year's first three months. The company's operating margin per ton averaged $4.21, more than double the $1.75 average a year ago.

Sales of coal from Arch's Central Appalachia operations averaged $69.54, compared with $48.36 during last year's second quarter. The company's operating margin increased roughly six-fold, to $20.16 from $3.51.

Arch said sales of its coal mined from Wyoming's Powder River Basin were off by 1 million tons from this year's first three months, given heavy rains in Wyoming and June flooding that swamped much of the Midwest, disrupting railroad shipping and barge traffic on the Mississippi River.

Before retreating in recent weeks, coal prices had been on a tear. Seaborne coal used to produce the steam that drives turbines in northern Europe surpassed $200 per metric ton in June, when prices of Central Appalachian steam coal crossed the $100-per-ton threshold, Arch said.

Over the first half of this year, Arch said it earned $194.1 million, or $1.34 per share, on revenues of $1.48 billion, compared with $66.3 million, or 46 cents per share, on $1.17 billion in revenues during the same period last year.

Arch's latest numbers offered more evidence of the coal sector's strength. On Wednesday, St. Louis-based Peabody Energy Corp. reported second-quarter profits that more than doubled to $233.4 million, or 86 cents per share, handily beating Wall Street's expectations. Peabody said its revenue rose 43 percent to $1.53 billion.

Combined with high ocean shipping rates and the weak dollar, strong demand for coal has helped fuel a resurgence in U.S. coal exports. The global thirst for coal has been robust in countries such as China and India.

Peabody said Wednesday that China has idled more than 60 coal plants because coal inventories have shrunk to less than three days supply. China also has trimmed its coal exports by more than 8 percent this year and announced plans to lower or eliminate its coal import tariffs, Peabody said.

Leer told analysts that Arch expects the global coal-supply deficit to reach nearly 35 million metric tons this year, "and we expect a growing deficit over the next five years."

"Given tight supply conditions and strong demand for coal globally, we have reached price levels that are unprecedented" and, in Arch's eyes, "sustainable over the next several years," said John Eaves, Arch's president and chief operating officer.

Coal from Arch, which last year had revenues of $2.4 billion, fuels about 6 percent of all U.S. electrical generation.

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On the Net:

Arch Coal Inc., http://www.archcoal.com

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