March 6, 2008 / 1:17 PM / 10 years ago

Sherritt profit climbs on strong commodity prices

OTTAWA (Reuters) - Sherritt International (S.TO) posted a 6-percent rise in fourth-quarter profit on Thursday, as robust commodity prices more than offset the effect of a stronger Canadian dollar on the diversified Canadian mining and energy company.

Sherritt, which has power, oil and metal investments in Canada, Cuba and Madagascar, said net earnings rose to C$83.5 million ($85.2 million), or 36 Canadian cents a share, from C$78.6 million, or 47 Canadian cents a share, in the same period last year, when it had a lower share count.

Analysts had expected earnings of 36 Canadian cents a share before exceptions, according to Reuters Estimates.

Shares in the Toronto-based company rose 4.5 percent in early trade on the Toronto Stock Exchange to C$16.02. So far this year, the stock has gained about 18 percent.

Revenue rose to C$323.6 million from C$304.2 million.

Earnings before interest, tax, depreciation and amortization grew 10 percent to C$175.5 million from C$159 million.

Sherritt bought 1.8 million shares for cancellation in the quarter at an average price of C$13.76 for a total of C$25.3 million.

At quarter’s end, it had assets of C$5.46 billion, including C$490 million in cash. The company recorded a fair value adjustment of C$14.9 million, or 6 Canadian cents a share, on its C$59.5 million of asset-backed commercial paper.

Company operations include nickel and cobalt mining, coal production, oil and gas production, and electricity generation. In 2006, it spun out the thermal coal business it co-owns with the Ontario Teachers’ Pension Plan into Royal Utilities Income Fund RU_u.TO.

Sherritt said 2008 will be a “capital intensive” year, with spending forecast at about C$2.2 billion. That reflects expansion work at its Moa Bay nickel-cobalt operation in Cuba and construction of the large Ambatovy nickel and cobalt project in Madagascar, which is on target for completion in 2010.

Full-year production is seen at 32,500 tonnes of nickel and 3,500 tonnes of cobalt. That compares to 2007 nickel output of 31,392 tonnes and 3,573 tonnes of cobalt.

Coal Valley output is forecast at about 4 million tonnes, a 17 percent increase over 2007 as new equipment is seen boosting production. About 75 percent of its contracts are up for renewal in 2008, with prices expected to be “materially higher” than the average realized price for 2007.

Sherritt also said it expects to submit an environmental impact assessment to Alberta regulators on its Dodds-Roundhill coal gasification project in the second quarter. If approved, construction of the plant and coal mine would start in 2010 and it would be in operation in 2012.

Production volumes for oil and gas in 2008 are not expected to change from 2007 levels. Power production in 2008 is forecast at 2,400 gigawatt-hours (GWh), with net capacity at about 80 percent, up from 2,288 GWh in 2007.

During the fourth quarter, Sherritt said the average realized price for cobalt rose to C$30.41 a pound from C$20.85 a pound in the year-before quarter. Nickel prices fell to C$12.63 a pound from C$16.88 a pound.

Nickel production in the quarter rose 3 percent to 4,344 tonnes and cobalt output was up 5 percent to 483 tonnes.

($1=$0.98 Canadian)

Reporting by Susan Taylor; Editing by Scott Anderson

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