Copper, among other things, went into pennies, and Teck Resources Ltd. (T.TCK.B) mines, among other things, copper. Ironically, in a week that saw pennies being taken out of circulation in Canada after more than a century and a half, Teck was in the news, alerting investors that its bottom line was not as sound as it had once been. The tidings provided a "down" note to the rollercoaster that the economy has been riding on in recent months.
On February 7, the Vancouver-based miner – one of the mainstays of the resource sector in this country – announced that its adjusted earnings and revenue for the fourth quarter beat analyst estimates easily, but its net profit fell to $145 million, or 25 cents per share. Teck also pointed to revenue registering down nearly $200 million from a year earlier.
Media outlets noted that analysts were looking for revenues to fall even more, so less bad news was perceived as good news. However, there was concern about its plans to reduce copper production this year, and Teck shares fell that day (more about that in a moment).
The cold, hard numbers read like this: Teck reported annual adjusted profit attributable to shareholders of $1.5 billion, or $2.60 per share, compared with a record $2.5 billion or $4.18 per share in 2011. Fourth-quarter adjusted profit attributable to shareholders was $354 million, or $0.61 per share, compared with $613 million, or $1.04 per share, in the fourth quarter of 2011.
Teck CEO Don Lindsay radiated optimism, at least in the news release. "Our copper production was a record, we continued to increase our steelmaking coal production and we obtained new labour agreements for a number of our operations.
"However," Lindsay continued, "due to uncertain global economic conditions, prices for all of our major products were down compared to last year, which resulted in lower earnings and cash flows than in 2011."
Lindsay pointed to agreements with coal customers to sell six million tonnes of coal in the first quarter of 2013 at an average price of $159 U.S. per tonne.
"We expect to conclude additional sales over the course of the quarter."
Teck’s cash balance was $2.9 billion as at February 6.
Teck trumpets its status as a diversified miner focusing on copper, steel-making coal, zinc and energy, and has other things going for it; namely, being the top-ranked Canadian company among the Global 100 Most Sustainable Corporation of 2013. Its place on the list was announced last month at the World Economic Forum in Davos, Switzerland. Teck has also been named to the Dow Jones Sustainability World Index for the last three years, which ranks Teck’s sustainability practices in the top 10% of companies in the resource sector worldwide
Still on the positive side of things, analyst Don Nelson of Edward Jones cited a number of factors, chief among them, coal and copper production coming in ahead of expectations. As well, Teck reduced its operating costs for its coal business and bought back shares from the public market, a move that tends to support share prices.
"The items the company can control" , said Nelson, "for example, production and costs — came in better than expected."
On the downside, Nelson said Teck's stock was likely under pressure Thursday because the company is projecting a 6% decline in copper output this year and no significant increase in steel-making coal.
"We were a bit disappointed with the '13 guidance," he said. "I think investors are looking at that '13 production guidance and extrapolating out results."
Traders shared in that disappointment on February 7, the day of the announcement; Teck stock neared that day's close down $2.35, or 6.4%, from the previous day’s close, at $34.29, on volume of 4.27 million shares. The stock’s 52-week high stood at $42.00 on February 8 of last year, plummeting to a 52-week low of $26.02 the week of Labour Day.
