Teck Resources Limited (TCK)

Q4 2011 Earnings Call

February 09, 2012 11:00 am ET

Executives

Gregory A. Waller - Vice President of Investor Relations & Strategic Analysis

Donald R. Lindsay - Chief Executive Officer, President, Non Independent Director and Member of Executive Committee

Ronald A. Millos - Chief Financial Officer and Senior Vice President of Finance

Robert W. Bell - Chief Commercial Officer of Coal and Vice President

Ian C. Kilgour - Senior Vice President of Coal

Roger J. Higgins - Senior Vice President of Copper

Analysts

Meredith H. Bandy - BMO Capital Markets Canada

Sohail Tharani - Goldman Sachs Group Inc., Research Division

David Lipner - Credit Agricole Securities (USA) Inc., Research Division

Oscar Cabrera - BofA Merrill Lynch, Research Division

Jorge M. Beristain - Deutsche Bank AG, Research Division

John Hughes - Desjardins Securities Inc., Research Division

Greg Barnes - TD Securities Equity Research

Brian MacArthur - UBS Investment Bank, Research Division

Daniel Rohr - Morningstar Inc., Research Division

David Neuhauser

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to Teck's Fourth Quarter 2011 Results Conference Call. [Operator Instructions] This conference call is being recorded on Thursday, February 9, 2012. I would now like to turn the conference call over to Greg Waller, Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Gregory A. Waller

Thank you, Valerie, and good morning, everyone, and thanks for joining us this morning for our fourth quarter 2011 earnings conference call.

Before we start, I'd like to draw your attention to the forward-looking information slides on Pages 2 and 3 of our presentation. This presentation contains forward-looking information regarding our business. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement.

And at this point, I'd like to turn the call over to Don Lindsay.

Donald R. Lindsay

Thanks, Greg. Good morning, everyone, and thanks for joining us. I will start with a review of the results for the quarter and then turn the presentation over to Ron Millos, our Senior Vice President, Finance, and CFO, to address some more in-depth financial topics. And I should say that a number of the other members of the management team are on the call this morning, and they're available to answer your questions and they're a bit spread around the world today from Anchorage to Santiago. So I look forward to hearing from them.

Turning to Slide 5. We're very pleased with the results for the year. We set a new record for revenues this year at over $11.5 billion, 25% higher than last year. We also set records for gross profit at $5.8 billion and bottom line profit at $2.7 billion, up 47% from last year. And EBITDA is -- at $5.5 billion was also a new record. We set a new company record for copper production of 322,000 tonnes, and a record for material moved in our coal operations, which is, of course, a good sign of production to come. And this banner year is a reflection of the strong fundamentals of our business, particularly in coal and copper.

Slide 6 shows our adjusted profit for the year, which removes unusual items and is also a comparison to last year. Record adjusted profit of approximately $2.5 billion, or $4.16 per share on a fully diluted basis, is 64% higher than adjusted profit per share last year.

Turning to Slide 7. Q4's revenues stood at about $3 billion, up over 9% from Q4 2010, and gross profit before depreciation and amortization was over $1.4 billion. Fourth quarter profit was $637 million, which was 95% higher than last year's fourth quarter but there was a large unusual item last year associated with debt repurchase, so it's more appropriate to look an adjusted profit. And fourth quarter adjusted profit was $613 million, which was up almost 20% from last year's fourth quarter, while over the same period, EBITDA was $1.3 billion.

On Slide 8, we show our view of normalized or adjusted profit for the quarter. Profit attributable to shareholders before adjustments was $637 million. We had a few unusual items in this quarter in the form of foreign exchange and derivative losses, onetime labor settlement charge and minor asset write-downs. Adjusting for these items, profit was $613 million for the quarter or $1.44 per share.

Now turning to our operating results for the quarter on Slide 9. In our coal business, production was up 11% year-over-year at 6.7 million tonnes. The average realized price for the fourth quarter was USD $253 per tonne, again about an 11% discount to the benchmark price of $285 for premium quality coal.

Fourth quarter 2011 unit site costs were $65 per tonne, and distribution costs came in at $33. That gave us combined costs of CAD $98, or USD $96, per tonne. And quarter-over-quarter, we've seen our costs decline by approximately 7%.

Turning to Slide 10. This chart shows both total material moved in the blue bars and clean coal production in the red line. The advances we've been making in terms of adding equipment and plant capacity and people are paying off, and in 2011, we moved a record amount of material and coal production continues to increase. So we're particularly pleased about that.

It's important to note that during the fourth quarter, we were producing at an almost a 27 million tonne annualized run rate. As we move more material, we expose more raw coal, the raw coal then makes its way to our standard and upgraded wash plants. And that sequence is key to our ongoing growth in coal production.

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