February 12, 2008 / 12:56 PM / 10 years ago

Fording profit plunges, mum of sale of business

TORONTO (Reuters) - Fording Canadian Coal Trust FDG_u.TO, a major metallurgical coal producer, remained tight-lipped about a possible sale of its business on Tuesday after it reported a 57 percent drop in fourth-quarter profit.

The company’s trustees formed an independent committee in December to explore strategic alternatives that also included a sale of its assets, a reorganization, or continuing with its current business plan.

“As indicated by the trustees in the press release, no further announcements would be made regarding the strategic review unless, and until, the trustees determine disclosure of material changes required,” Jim Brown, Fording’s chief financial officer, said on a conference call.

“Other than to say the process in ongoing, we are not able to comment further at this time.”

The independent committee has the authority to discuss possible transactions with interested parties and to make recommendations to the trustees and directors.

Fording also shied away from saying whether it had entered into any confidentiality agreements since the review started. It also would not set a deadline for when it may offer unitholders an update.

“I can’t comment on the specifics of the process at this point ... we really don’t know,” Brown said. “It’s open ended at this point and there are no hard dates in the process.”

The comments were made during a conference call to discuss the company’s fourth-quarter results, which were hit hard by lower realized coal prices but still beat estimates before special items.

Fording’s net income from continuing operations was C$48.8 million, or 33 Canadian cents a unit, in the three months ended December 31, down from C$114.6 million, or 78 Canadian cents a unit, in the year-earlier period.

Before special items, Fording earned C$74.9 million from continuing operations, or 51 Canadian cents a unit, down from C$116.3 million, or 79 Canadian cents.

The trust was expected to post a per-unit profit of 38 Canadian cents before special items, the average forecast among analysts polled by Reuters Estimates.

Calgary, Alberta-based Fording, which owns 60 percent of the Elk Valley Coal Partnership -- the world’s second-largest exporter of metallurgical coal used in steel making -- said the 17.5 percent rise in the Canadian dollar relative to the U.S. dollar in 2007 hit the Elk Valley business.

“Elk Valley Coal believes that the global metallurgical coal markets have entered a period of unprecedented volatility,” Fording said in a release, adding that “a deep U.S. recession” could adversely impact the coal markets.

The company said the outlook strengthens for the year starting April 1, 2008 due to tight supply, but that Elk Valley will not see that benefit “until possibly the third quarter of calendar 2008.”

Cash available for distribution for unitholders fell 49 percent to C$75 million, or 50 Canadian cents per unit, from C$147 million, or C$1 per unit, in the year-earlier quarter.

Revenue in the quarter was C$327.5 million, down from C$424.9 million.

Fording units were down C$1.14, or 2.5 percent, at C$44.86 on the Toronto Stock Exchange on Tuesday morning. The units are up about 65 percent over the past 12 months.

($1=$0.99 Canadian)

Additional reporting by Jonathan Spicer; Editing by Peter Galloway

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