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Press Release: Teck Reports Unaudited Second -2-

26 Jul 2018 9:43 am

In addition to the items identified in the table above, our results include gains and losses due to changes in market prices and interest rates in respect of pricing adjustments, commodity derivatives, share-based compensation and changes in the discounted value of decommissioning and restoration costs at closed mines. Taken together, these items resulted in $38 million of after-tax losses ($53 million before tax) in the second quarter, or $0.07 per share. We do not adjust our reported profit for these items as they occur on a regular basis.

Note:

1) Non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" section for further information.
 
                                     Three months      Six months 
FINANCIAL OVERVIEW                   ended June 30,     ended June 30, 
(CAD$ in millions, except per 
share data)                            2018     2017        2018     2017 
Revenues and profit 
 Revenues                          $   3,016  $ 2,832   $   6,108  $ 5,679 
 Gross profit before 
  depreciation and 
  amortization(1)                  $   1,594  $ 1,442   $   3,304  $ 2,951 
 Gross profit                      $   1,241  $ 1,073   $   2,601  $ 2,236 
 EBITDA(1)                         $   1,403  $ 1,341   $   2,958  $ 2,656 
 Profit attributable to 
  shareholders                     $     634  $   580   $   1,393  $ 1,136 
Cash flow 
 Cash flow from operations         $   1,107  $ 1,408   $   2,227  $ 2,701 
 Property, plant and equipment 
  expenditures                     $     345  $   329   $     805  $   685 
 Capitalized stripping costs       $     175  $   173   $     372  $   325 
 Investments                       $     119  $    32   $     150  $    71 
Balance Sheet 
 Cash balances                                          $   1,631  $   846 
 Total assets                                           $  38,634  $34,898 
 Debt, including current portion                        $   6,619  $ 6,385 
Per share amounts 
 Profit attributable to 
  shareholders                     $    1.10  $  1.00   $    2.43  $  1.97 
 Dividends declared                $    0.05  $  0.10   $    0.10  $  0.10 
PRODUCTION, SALES AND PRICES 
Production (000's tonnes, except 
steelmaking coal and bitumen) 
 Steelmaking coal (million 
  tonnes)                                6.3      6.8        12.5     12.9 
 Copper(2)                                75       70         149      134 
 Zinc in concentrate                     188      158         336      304 
 Zinc -- refined                          75       74         154      152 
 Bitumen (million barrels)(3)            0.7       --         0.7       -- 
Sales (000's tonnes, except 
steelmaking coal and blended 
bitumen) 
 Steelmaking coal (million 
  tonnes)                                6.6      7.1        12.7     12.8 
 Copper(2)                                74       69         151      133 
 Zinc in concentrate                     115      113         255      246 
 Zinc -- refined                          77       74         154      150 
 Blended bitumen (million 
  barrels)(3)                            1.2       --         1.2       -- 
Average prices and exchange 
rates 
 Steelmaking coal (realized 
  US$/tonne)                       $     183  $   167   $     194  $   187 
 Copper (LME cash -- US$/pound)    $    3.12  $  2.57   $    3.14  $  2.61 
 Zinc (LME cash -- US$/ pound)     $    1.41  $  1.18   $    1.48  $  1.22 
 Blended bitumen (realized 
  US$/barrel)(3)                   $   53.32  $    --   $   53.32  $    -- 
 Average exchange rate (C$ per 
  US$1.00)                         $    1.29  $  1.35   $    1.28  $  1.33 
 

Notes:

1) Non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" section for further information.

2) We include 100% of production and sales from our Quebrada Blanca and Carmen de Andacollo mines in our production and sales volumes, even though we own 90% (effective April 2018) and 90%, respectively, of these operations, because we fully consolidate their results in our financial statements. We include 22.5% and 21.31% of production and sales from Antamina and Fort Hills, respectively, representing our proportionate ownership interest in these operations.

3) Production volumes, sales volumes and realized prices for bitumen are from June 1, 2018.

BUSINESS UNIT RESULTS

Our revenues, gross profit before depreciation and amortization, and gross profit by business unit are summarized in the table below.
 
                           Three months       Six months 
                          ended June 30,       ended June 30, 
 (CAD$ in millions)    2018        2017        2018        2017 
 
 Revenues 
   Steelmaking coal   $1,582      $1,610      $3,170      $3,229 
   Copper                731         562       1,470       1,075 
   Zinc                  625         660       1,390       1,375 
   Energy(1)              78          --          78          -- 
 Total                $3,016      $2,832      $6,108      $5,679 
 
 Gross profit, 
 before depreciation 
 and 
 amortization(2) 
   Steelmaking coal   $  957      $  993      $1,960      $2,102 
   Copper                390         253         805         448 
   Zinc                  234         196         526         401 
   Energy(1)              13          --          13          -- 
 Total                $1,594      $1,442      $3,304      $2,951 
 
 Gross profit 
   Steelmaking coal   $  771      $  801      $1,587      $1,764 
   Copper                275         119         568         155 
   Zinc                  194         153         445         317 
   Energy(1)               1          --           1          -- 
 Total                $1,241      $1,073      $2,601      $2,236 
 
 
 Gross profit 
 margins before 
 depreciation(2) 
   Steelmaking coal       60%         62%         62%         65% 
   Copper                 53%         45%         55%         42% 
   Zinc                   37%         30%         38%         29% 
   Energy(1)              17%         --          17%         -- 
 

Note:

1) Energy results are effective from June 1, 2018.

2) Non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" section for further information.

STEELMAKING COAL BUSINESS UNIT
 
                                     Three months      Six months 
                                     ended June 30,     ended June 30, 
(CAD$ in millions)                     2018     2017        2018     2017 
Steelmaking coal price (realized 
 US$/tonne)                        $     183  $   167   $     194  $   187 
Steelmaking coal price (realized 
 CAD$/tonne)                       $     236  $   226   $     248  $   251 
Production (million tonnes)              6.3      6.8        12.5     12.9 
Sales (million tonnes)                   6.6      7.1        12.7     12.8 
Gross profit, before 
 depreciation and 
 amortization(1)                   $     957  $   993   $   1,960  $ 2,102 
Gross profit                       $     771  $   801   $   1,587  $ 1,764 
Property, plant and equipment 
 expenditures                      $      48  $    10   $     146  $    61 
 

Note:

1) Non-GAAP financial measure. See "Use of Non-GAAP Financial Measures" section for further information.

Performance

Gross profit in the second quarter from our steelmaking coal business unit was $771 million compared with $801 million a year ago. Despite higher realized steelmaking coal prices, gross profit before depreciation and amortization in the second quarter declined by $36 million from a year ago (see table below) due to lower sales volumes and higher operating costs.

Second quarter sales of 6.6 million tonnes were 7% lower than a year ago, as port inventories remained low and sales volumes were negatively affected by lost rail capacity, estimated at approximately 300,000 tonnes. The lost tonnes were a result of strike preparation at CP Rail's operations on two occasions in mid-April and late-May.

The table below summarizes the gross profit changes, before depreciation and amortization, in our steelmaking coal business unit for the quarter:
 
                                               Three months 
(CAD$ in millions)                              ended June 30, 
 
As reported in second quarter of 2017           $         993 
Increase (decrease): 
 Steelmaking coal price realized                          132 
 Sales volumes                                            (58) 
 Unit operating and transportation costs                  (45) 
 Foreign exchange                                         (65) 
Net decrease                                              (36) 
As reported in current quarter                  $         957 
 

Property, plant and equipment expenditures totaled $48 million in the second quarter, of which $23 million was for sustaining capital. Capitalized stripping costs were $130 million in the second quarter compared with $132 million a year ago, as we continue development in recently permitted areas.

Markets

The second quarter price index for steelmaking coal sold under quarterly contracts was US$197 per tonne. Global steel production and demand for seaborne steelmaking coal remained strong through the first half of 2018. Factors affecting the market included strong steel pricing and demand in China, as well as ongoing closure of excess capacity, robust steel production and pricing in the rest of the world due to synchronized global growth and reduced steel exports from China. Depletion and reduced production of some Eastern European coal mines continued to increase demand for seaborne steelmaking coal for European steel mills. In addition, continuing logistics and production issues constrained coal supply and this also supported the coal market.

While demand for steelmaking coal remains strong, government policy and trade war uncertainty has created price volatility and placed downward pressure on steelmaking coal prices, which we believe contributed to the decline in prices subsequent to the end of the second quarter.

Operations

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July 26, 2018 05:43 ET (09:43 GMT)
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