April 22, 2008 / 8:07 AM / in 10 years

Fording Coal profit plunges, sees big price rise

CALGARY, Alberta (Reuters) - Fording Canadian Coal Trust FDG_u.TO, whose unit price has more the doubled in the past year, forecast on Tuesday a big rise in its coal price for 2008 even as it reported a 45 percent drop in its first-quarter profit.

Fording, which owns 60 percent of the Elk Valley partnership, the world’s No. 2 exporter of the metallurgical coal crucial for steelmaking, said it expects prices for its coal this year to average $195 to $205 per tonne, more than double the $95.70 per tonne received in the 2007 coal year that ended April 1.

The jump in metallurgical coal prices comes as flooding cut Australian supplies and demand from steelmakers remains robust.

“Demand for steel products has remained stable in developed countries in spite of the U.S. recessionary pressure and production continues to grow strongly in developing countries,” Robert Bell, chief commercial officer for Elk Valley Coal, said on a conference call.

Bell said coal supplies are expected to remain tight beyond this year as demand increases take up new supply and customers rebuild stocks.

Rising coal prices have also pushed Fording’s unit price higher, as it more than doubled over the past year. But weaker than expected first-quarter earnings cut into the gains, with the units shedding C$1.64 to C$65.87 on Tuesday on the Toronto Stock Exchange.


Fording said it earned C$39 million from continuing operations, or 26 Canadian cents per unit, in the quarter, down from C$70.6 million, or 48 Canadian cents, a year earlier.

The result lagged the average 47 Canadian cents per-unit profit forecast by analysts polled by Reuters Estimates.

The trust said the drop came on weak coal prices in the quarter and the strengthening Canadian dollar. And though the amount of coal it shipped rose 22 percent, to 3.5 million tonnes, that was in comparison to a year-earlier quarter during which poor weather cut rail shipments to ports.

Cash available for distribution to unitholders was C$56 million, or 38 Canadian cents a unit, down from C$77 million, or 53 Canadian cents, in the year-before quarter.

Revenue fell about 5 percent to C$332 million.


Fording, which in December launched a strategic review it said could lead to the sale of the company, had little to say on Tuesday about when a decision would be made.

Boyd Payne, the trust’s president, said a board committee was still looking at strategic alternatives but declined to say if bidders had come forward.

“The process continues but we are unable to comment further,” Payne said.

Teck Cominco Ltd TCKb.TO, Fording’s biggest shareholder, said in February it supported the review but was not involved in any talks.

($1=$1.01 Canadian)

Reporting by Scott Haggett and Aarthi Sivaraman; Editing by Peter Galloway

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