Teck Resources Q1 Profit Falls On Lower Prices; Plans 600 Job Cuts - Update

(RTTNews) - Teck Resources Ltd.(TCK, TCK_A.TO, TCK_B.TO) reported Tuesday a decline in first-quarter profit, as revenues were hurt mainly by lower commodity prices, especially coal, despite increased production. The Canadian natural resources explorer further said it is increasing efforts on reducing costs and capital spending in light of the current low commodity price environment. The company plans a 5 percent or approximately 600 position reduction in global workforce and a 5 percent reduction in other costs for total savings of approximately C$200 million.

For the first quarter, profit attributable to shareholders declined to C$69 million or C$0.12 per share from C$319 million or C$0.55 per share a year ago.

Adjusted profit, excluding the effect of tax adjustments and asset provisions, was C$105 million or C$0.18 per share, compared to C$328 million or C$0.56 per share a year ago.

The company attributed the lower results to lower commodity prices, especially for coal as increased supply from Australian mines has affected markets.

Cash flow from operations, before working capital changes, was C$470 million, lower than C$776 million a year ago. Earnings before interest, tax, depreciation and amortization or EBITDA also declined to C$557 million from C$902 million last year.

Revenues for the quarter declined to C$2.084 billion from last year's C$2.330 billion. In the quarter, coal production of 6.7 million tonnes rose 8 percent from last year as a result of higher capacity utilization. Meanwhile, coal sales of 6.2 million tonnes were 6 percent lower .

Production of copper rose 2 percent and zinc in concentrate went up 11 percent.

Meanwhile, coal and copper prices in U.S. dollar terms were lower by 19 percent and 11 percent, respectively. The company noted that coal prices are currently at their lowest level since 2007 and margins are at their lowest level in ten years.

Regarding its cost reduction program, the company said the program has exceeded its initial goals, and is targeting a further C$200 million of annualized cost reductions and C$150 million of capital expenditure reductions.

The previously disclosed 2014 capital expenditure forecast has been reduced by approximately C$105 million to C$1.8 billion from C$1.9 billion.

Teck Resources also expect to spend C$700 million on capitalized stripping preparing mining areas for future production, which is unchanged from its previous guidance.

In addition, it is deferring the potential restart of the Quintette steelmaking coal mine until coal market conditions improve. The project, which is expected to produce between three and four million tonnes of steelmaking coal, is being put on care and maintenance until market conditions for a restart are favourable.

The planned job reduction will be through attrition, hiring freezes and reductions in contractors and employees at operations and corporate offices, the company noted.

With these additional efforts, the company expects to maintain competitiveness and emerge stronger from the current price cycle.

Further, the company noted that with recent and expected closures of a number of zinc mines, approximately 1.5 million tonnes of current zinc mine production will be closed by the end of 2016 in a 13 million tonne per year market. As a result, the company is planning to restart Pend Oreille mine, which has been on care and maintenance since early 2009, with a more favourable outlook for zinc prices. The mine is expected to produce 44,000 tonnes of zinc in concentrate per year for at least five years.

On the NYSE, Teck Resources shares closed Monday's trading at $21.79, down $0.28 or 1.27 percent.