April 25, 2017 / 8:01 AM / 2 years ago

Teck Resources profit misses estimates as costs rise, shares slip

TORONTO (Reuters) - Teck Resources Ltd TCKb.TO (TECK.N), North America’s largest producer of steelmaking coal, reported earnings and revenue that lagged expectations on weakness at its zinc unit, sending its U.S.-listed shares down about 6 percent.

TD Securities analyst Greg Barnes said the earnings miss reflects lower sales and higher costs at Teck’s zinc unit, which he had expected to report a gross profit of C$276 million.

The unit reported first quarter gross profit of C$164 million on increased operating costs and a 23 percent production drop at Red Dog mine, due to lower grades. Zinc in concentrate production fell to 130,000 tonnes from 165,000 tonnes in the same period last year.

Teck also lowered its 2017 zinc guidance to 590,000-615,000 tonnes from 660,000-680,000 tonnes previously, said Clarksons Platou analyst Jeremy Sussman, due to weather and electrical equipment failures at Red Dog.

U.S.-listed shares of the company were down $1.35 at $20.61.

The Vancouver-based diversified miner, which primarily mines coal, zinc and copper, reported adjusted first quarter earnings of C$1.16 per share and revenue of C$2.89 billion ($2.13 billion).

Both trailed analyst expectations for C$1.29 in earnings and C$3.04 billion in revenue, according to Thomson Reuters I/B/E/S.

Teck, which has been using cash flow and profit to cut debt, had debt of US$5.1 billion at the end of the quarter.

After completing its debt reduction plan, the company has said it will consider increasing or revising its dividend policy. In 2015, Teck cut its twice-yearly dividend two times.

The company sold 5.9 million tonnes of steelmaking, or coking, coal, at an average realized price of $213 per tonne, in the three months ended March 31.

First-quarter coal production was 6.1 million tonnes, 8 percent lower than last year, and production costs rose by C$13 to C$56 per tonne, Teck said.

Demand for steelmaking coal increased after a slow start in the quarter and Teck said it is in a “strong position” for the rest of the year.

Second-quarter benchmark pricing for steelmaking coal has not been agreed up, Teck said, due to supply disruptions in Australia following Cyclone Debbie. It reaffirmed a second-quarter sales forecast of at least 6.8 million tonnes of steelmaking coal.

Reports suggest a key rail coal rail line in Australia will restart at the end of April, but it will take time to clear a backlog of vessels at port, Teck said.

Spot prices for steelmaking coal SCAFc1 stabilized at $150 to $160 per tonne in the first quarter, after topping $300 last November, while copper and zinc prices rose by 25 percent and 66 percent, respectively, Teck said.

($1 = 1.3599 Canadian dollars

Reporting by Susan Taylor and Abinaya Vijayaraghavan; Editing by Gopakumar Warrier, Bernard Orr

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