VANCOUVER - Teck Resources Ltd. (TSX:TCK.B) is feeling the impact of low prices for the types of commodities the Vancouver-based mining company produces, raising concerns about its financial performance later this year.
Teck's adjusted earnings and revenue for the fourth quarter beat analyst estimates by a wide margin but its net profit fell to $145 million, or 25 cents per share and revenue was down nearly $200 million from a year earlier.
Analysts had expected revenue to fall by even more, according to Thomson Reuters estimates, so Teck won praise on that front. However, there was concern about its plans to reduce copper production this year, and Teck shares fell.
"There were a lot of things to like in the quarter," said Edward Jones analyst Jeff Nelson, who covers Canadian resource and industrial companies from St. Louis, Mo.
First and foremost, he said, coal and copper production came in ahead of expectations. As well, Teck reduced operating costs for its coal business and bought back shares from the public market, a move that tends to support share prices.
"You know, the items the company can control — for example production and costs — came in better than expected."
Revenue for the quarter dropped to $2.73 billion from $2.97 billion year over year, but the consensus estimate had been for Teck's revenue to fall to about $2.55 billion.
On an adjusted basis, Teck had $354 million or 61 cents per share of earnings in the latest quarter — 13 cents above a consensus estimate.
Despite doing well on a number of measures, Teck's stock dropped $1.94 or about five per cent to $34.70 at mid-day on the Toronto Stock Exchange — continuing a retreat from the 2013 high of $38.13 set on Jan. 28.
Nelson said Teck's stock was likely under pressure Thursday because the company is projecting a six per cent 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."
The company's outlook is for Teck to produce 340,000 to 360,000 tonnes of copper, down from 373,000 tonnes produced last year. Zinc production is also expected to be reduced, both in concentrate and refined form.
In the fourth quarter, Teck said, the company had been able to offset lower prices for metallurgical coal with the higher copper output.
Teck's net profit was down from $637 million or $1.08 a share in the fourth quarter of 2011, a year that produced a record profit for the company. The net profit included $259 million in expenses related to financing in the latest quarter and other items both years that were not counted in adjusted earnings.
"From an operations perspective, 2012 was a good year," said Teck chief executive Don Lindsay said in a statement.
"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," Lindsay said.
"However, 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."