Teck Resources' profit hit by lower coal prices
Canada's largest diversified miner Teck Resources (TSX:TCK.A, TCK.B), (NYSE: TCK) posted Thursday a 44% drop in quarterly earnings caused mainly by “significantly” lower coal prices, yet it beat expectations by a penny exceeded its cost-cutting goals.
The Vancouver-based company, which produces coal, copper and zinc, noted prices for the fossil fuel tumbled US$111 per tonne in the second quarter from $156 per tonne a year earlier, the lowest since 2007.
The drop overshadowed the miner’s coal sales increase during the quarter, which totalled 6.8 million tonnes, compared with 6.3 million tonnes a year earlier.
Weak coal prices, however, have forced the firm to tighten up its belt. In April it announced it planned to cut about 600 jobs, or 5% of its global workforce.
Teck earned $74.6 million (Cdn$80 million) or 14 Canadian cents a share, down from $133 million (Cdn$143m), or 25 Canadian cents, a year earlier. Its quarterly adjusted profit was 13 Canadian cents a share, down from 34 Canadian cents a year earlier but ahead of the Thomson Reuters mean estimate of 12 Canadian cents.
The Canadian miner also said that a cost cutting program launched in 2012 has exceeded its initial goals. So far Teck said it has identified $180 million of ongoing annual operating cost savings, implemented $170 million of them, and realized $150 million on an annualized basis.
Next stop: oil sands
Teck said its primary development focus is on securing a significant interest in the Alberta oil sands with the development of the Fort Hills Oil Sands project, which it owns in partnership with Suncor Energy (TSX:SU, NYSE: SU) and Total SA (NYSE:TOT).
The firm said the construction phase of Fort Hills will require substantial investment of capital through 2017, but that the investment will eventually generate significant cash flows, diversify its commodity mix and provide a long-life asset in a stable jurisdiction.
The company’s stock, which has fallen about 7% this year on the Toronto Stock Exchange, was up over 4% at 10:45 am ET, changing hands at $26.74.
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