Teck Cominco (TSX: TCK.B, Stock Forum) reported Tuesday that its net earnings for the first quarter were $241 million, or 50 cents per share, down from $345 million or 78 cents per share in the first quarter of 2008.
Earnings included positive after-tax pricing adjustments of $43 million, primarily due to rising copper prices, compared with $74 million in the same period last year, says Teck.
The company notes that revenues in the first quarter reached $1.7 billion, up 11% from $1.5 billion in 2008. Revenues from coal operations increased by $653 million, with $524 million attributable to the company’s increased ownership interest in Teck Coal. This was partially offset by reduced copper and zinc revenues of $494 million due to lower base metal prices.
Last year, Teck we acquired all the assets of the Fording Canadian Coal Trust, which primarily consisted of Fording's 60% interest in Teck Coal. However, in order to finance the acquisition of the Fording assets, the company entered into bridge and term financing facilities of US$9.8 billion, with $9.2 billion outstanding as of April 20.
The company notes that it has taken several steps to help it meet its obligations under its lending agreements, including selling its investments in the Lobo-Marte gold property in Chile, sales of its 50% interest in the Hemlo gold mines, and a 75% interest in the future gold production from the Andacollo mine.
Teck also said that it suspended its semi-annual dividend, reduced production at Trail and Teck Coal to better match supply to demand and reduced its workforce by 1,400 positions.
The company also says it is in “advanced negotiations” with its lenders to amend the terms of the bridge and term loans related to the Fording acquisition.
“Our ability to repay or refinance the bridge facility prior to its maturity and make the scheduled instalment payments on the term facility depends on a number of factors, some of which are beyond our control. There is no assurance that our expected cash flows from operations in combination with asset sales and other steps being taken will allow us to meet these revised obligations as they become due,” says Teck.
"General economic conditions have improved somewhat in the first quarter of the year, but we are still operating in challenging times," said Don Lindsay, president and CEO. "Our operations performed well, with all of our major sites generating positive cash flow from operations in the quarter. We are also making progress with our debt reduction plan and our non-core asset sales."
Shares of Teck Cominco were down 1.3% to $8.99 Tuesday.
On the Teck Bullboard Tuesday, moneyfornothin1 said: “SP will most probably gap down on open as they did yesterday. As expected they failed to express any major news regarding the debt, mostly the same information as outlined in their 4th quarter. I'm guessing the SP should easily go to $8 as I originally mentioned on Friday[sic].”
