Teck plays down M&A moves as profit hit by coal price
By Julie Gordon
TORONTO (Reuters) - Teck Resources Ltd TCKb.TO TCK.N reported a sharp fall in quarterly adjusted profit on Tuesday as sagging prices for coal and copper hurt Canada's largest diversified miner, whose CEO played down any major takeover moves.
While the earnings in the first quarter were higher than market expectations, Teck's shares fell as much as 7 percent shortly after the market open as copper prices dropped to a fresh 18-month low. Some analysts voiced concerns over the delay of a major Teck development project and the impact of lower copper and coal prices on the company.
The stock cut its losses and was down 1.9 percent at C$25.52 on the Toronto Stock Exchange around midday.
The company, which has been touted as a potential suitor for Rio Tinto Plc's (RIO.L: Quote) iron ore assets in Eastern Canada, will be prudent with the use of its balance sheet, Chief Executive Don Lindsay told investors on a conference call.
"There has been a lot of speculation about us pursuing major M&A transactions and I can tell you this is grossly overblown," he said. "We continue to be disciplined in our approach to new investment."
Teck, under pressure from the recent plunge in commodity prices due to global growth concerns, said efforts to cut spending were going well, with some C$275 million ($267.81 million) in cost savings and expenditure deferrals already identified for this year.
"They're doing a good job of managing the business in a pretty tough metallurgical coal and copper market," said Garrett Nelson, a mining analyst at BB&T Capital Markets. "The coal business appears to be firing on all cylinders in a very challenging environment."
Teck's coal sales rose 24 percent to 6.6 million tonnes in the quarter, while the cost of sales fell 20 percent to C$47 a tonne. Despite higher volumes and lower costs, coal revenues dropped by C$138 million as coal prices plunged 28 percent to $161 a tonne. Continued...