Teck’s profits down, but still beat Q3 expectations

Trent Ernst, Editor

 

Teck beat the street, even though their year-over-year profit was only $252 million, down from $425 for the same time last year.

Teck announced adjusted share profit of 44 cents for the third quarter, exceeding analysts’ expectations of 38 cents. That’s down from 73 cents from last year.

Revenues were $2.5 billion, which was similar to the same period last year, despite lower prices for all of Teck’s principal products. The lower prices were offset by a stronger US dollar and higher sales volume in coal and zinc.

Teck Chief Executive Officer Don Lindsay sees signs that commodity prices have bottomed. This has led to speculation that Teck could be positioning itself to go on the acquisition trail to snap up bargains.

However, Lindsay says the company is taking a cautious approach to mergers and acquisitions.

“People do speculate from time to time on what we might or might not do,” Lindsay said during their conference call, “We do review opportunities, as you would expect us to, and we look at pretty much everything that is out there. Some of them, we look at for a couple of hours, some of them for a couple of days and others we could spend weeks on them.”

Coal sales were up 36 percent from last year, though prices were down. However, cost per tonne was also down, coming in at $50/tonne, down from $58/tonne in the third quarter of last year. “We set a new sales record for steelmaking coal in the quarter, at 7.6 million tonnes,” says Lindsay. “Demand from customers in each of our market segments including traditional contract customers, spot sales, and development markets for new customers has been strong.”

Coal prices are starting to creep back up, and Lindsay is hoping to see this trend continue. “The current price for steelmaking coal remains below what we believe is required to sustain adequate production in the industry in the long term,” he says.

Lindsay says Teck is getting close to peak capacity of about 27 million tonnes a year. In 2014, he expects the company will be able to produce 28 million tonnes, though the actual production rate “will be a function of market demand.”

Teck still has six months or so before they are expected to make a decision on whether to re-open Quintette. “Even though we know that Quintette will be much more competitive as an operation than some of the coal operations that are still running, we don’t want to contribute to the oversupply that’s in the market, and thereby hurt the other six operating mines that we have,” Lindsay said.

“We have the option to grow capacity by a further three million to four million tonnes by restarting our Quintette mine,” says Lindsay. “We will review it again in the spring of 2014. In the meantime, we are continuing engineering work so if market conditions are good and we decide to go ahead, Quintette could be in production in mid-2015.”

Lindsay promises a more complete update during the next conference call.