Canada: Teck Resources' Earnings Weighted Down by Decline in Coal Prices
...
Teck Resources, a diversified natural resources company headquartered in Vancouver-Canada, has reported a drastic slump in profit earned from its steel-making (coking) coal business during the fourth quarter of CY19.
Company's gross profit during Q4 CY19 decreased to Canadian Dollar (CAD) 241 Million compared with CAD 819 Million a year ago. While, net profit before depreciation and amortization for coal business declined by CAD 552 Million a year ago to CAD 448 Million in Q4 CY19, primarily due to:
o Hefty decrease in realized coking coal prices
o Inventory write-downs of CAD 28 Million as a result of the decline in prices
o Lower sales volumes.
Teck Resources' price realization for coking coal was assessed USD 131/MT in Q4 CY19, down 19% Y-o-Y from USD 161/MT in Q4 CY18.
Company's sales volume in the fourth quarter had decreased 5% Y-o-Y to 6.3 MnT in Q4 CY19 but were within the guidance range of 6.2-6.4 MnT. The sales were affected by several delayed vessel arrivals, primarily due to rough Pacific sea conditions, and lower Ridley Terminals port performance towards the end of Dec'19 as a result of challenging weather and operational issues.
Fourth quarter production of 6.7 MnT was marked 8% lower than the same period a year ago, as a result of mining challenges at our Fording River Operations. These challenges were partially offset by all-time record production at Elkview Operations in the fourth quarter and strong processing throughput at other operations.
Overview of CY19:
Teck resources overall coal production dropped 2% Y-o-Y to 25.7 MnT in CY19 as against 26.2 MnT in CY18.
Logistics performance issues across the supply chain due to underperformance in port and rail services resulted in lower coal sales during CY19, which had fell 4% on the year to 25 MnT.
| Parameters | Q4 CY19 | Q4 CY18 | % Change | CY19 | CY18 | % Change |
| Coal Production | 6.7 | 7.3 | -8% | 25.7 | 26.2 | -2% |
| Coal Sales | 6.3 | 6.6 | -5% | 25 | 26 | -4% |
| Price Realisation | 131 | 161 | -19% | 164 | 187 | -12% |
Source: Teck Resources
Quantity in MnT | Prices in USD/MT
Entire data is specifically related to company's coking coal business
Outlook for CY20:
With improvement in logistics constraints, Teck Resources has reported record-high site inventory levels at the beginning of CY20, thus reducing its operating flexibility.
Additionally, as a consequence of the potential for weaker demand in the short-term due to the effects of the coronavirus and the high inventory levels, the company has decided to temporarily reduce production and implement a shutdown of Neptune Bulk Terminals in order to progress the facility upgrade.
For the CY20, company's production guidance for coking coal has been set between 23.0-25.0 MnT.
