July 28, 2010 / 12:42 AM / 7 years ago

UPDATE 3-Teck operating profit boosted by coal business

* Q2 Operating profit C$741 mln Vs C$636 mln a yr-ago

* Q2 Net EPS C$0.44 Vs C$1.17 a yr-ago

* Qtrly revenue up 24 pct to C$2.11 bln (Adds analyst comment, graphic, details; All figures in U.S. dollars, unless noted)

By Euan Rocha

TORONTO, July 27 (Reuters) - Teck Resources TCKb.TO said on Tuesday its second-quarter operating profit rose 17 percent, driven by stronger copper and zinc prices, along with a sharp increase in both coal pricing and shipments.

The Vancouver, British Columbia-based diversified miner said recent declines in the pricing of metallurgical coal -- which is used in the steelmaking process -- will have little impact on its third-quarter performance, as it has already agreed on pricing with the majority of its contract customers.

The company expects its average coal selling price in the third-quarter to be between $195 and $200 a tonne. This is about 9 percent above its average second-quarter price of $182 per tonne.

Teck said that though its primary end-markets moderated in the second-quarter, the markets are much improved in comparison to year ago levels.

“While general economic conditions have improved compared to last year, financial and commodity markets continue to exhibit unusual volatility due to uncertainty concerning the short and medium term global economic outlook,” the company said in a statement.

QUARTERLY PROFIT

Teck said its operating profit in the quarter ended June 30 rose to C$741 million, up from a year-ago profit of C$636 million.

However, its net income fell to C$260 million, or 44 Canadian cents a share, down from C$570 million, or C$1.17 a share, in the year-ago period when results benefited from a large foreign exchange-related gain and assets sales.

Excluding foreign-exchange adjustments and other items, the company said adjusted earnings rose to C$324 million, from C$215 million a year earlier.

Adjusted earnings came in at 55 Canadian cents a share, slightly below the consensus view of 60 Canadian cents a share, according to Thomson Reuters I/B/E/S.

“I don’t think it’s dramatic, I don’t think it’s that big a deal (that Teck missed expectations),” said TD Newcrest analyst Greg Barnes.

Many analysts have been expecting Canadian base metal miners to report slightly weaker-than-expected results this quarter, as companies were forced to make downward pricing adjustments, to account for declines in commodity prices in the latter part of the second quarter.

“We believe that sentiment has already substantially incorporated the expectation of weaker near-term earnings ... Only extreme outliers could in our view justify a negative market response,” said UBS analyst Brian MacArthur in a recent note to clients.

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For Sector Comparison: link.reuters.com/wyv79m

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REVENUE GROWTH

Revenue in the quarter rose 23.6 percent to C$2.11 billion, as coal sales volumes rose nearly 30 percent above year-ago levels.

Teck said revenues from its copper and zinc business units increased by C$161 million, primarily due to significantly higher base metal prices and higher copper sales volumes.

The company said its 2010 capital expenditures are expected to be about C$1.05 billion, with C$375 million directed toward sustaining existing projects and C$675 million being utilized on development projects.

In April, Teck reinstated its common share dividend, which had been suspended in late 2008 while the company struggled to pay off billions of dollars in acquisition debt. [ID:nN22107208]

Teck borrowed $9.8 billion in term and bridge debt to buy Fording Canadian Coal Trust just ahead of the 2008 resource price crash and global economic slowdown.

Vancouver-based Teck spent most of 2009 and early 2010 paying back the debt -- primarily through asset sales, suspending its dividend, and a $4.2 billion bond issue. It paid-off the last portion of the acquisition-related bank debt in April. ($1= $1.04 Canadian) (Reporting by Euan Rocha; Editing by Richard Chang, Bernard Orr)

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