TECK RESOURCES LIMITED Q1 2010 Earnings Call Transcript

TECK RESOURCES LIMITED Q1 2010 Earnings Call Transcript
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TECK RESOURCES LIMITED (TCK)

Q1 2010 Earnings Call

April 21, 2010 11:00 am ET

Executives

Greg Waller - VP, IR & Strategic Analysis

Don Lindsay - President & CEO

John Gingell - Controller

Scott Wilson - Treasurer

Ray Reipas - VP, Energy

Boyd Payne - SVP, Coal

Tim Watson - SVP, Project Development

Analysts

Meredith Bandy - BMO Capital Markets

Orest Wowkodaw - Canaccord

Greg Barnes - TD Newcrest

Haytham Hodaly - Salman Partners

John Tumazos - Very Independent Research

Mark Author - Credit Suisse

Andrew Wells - IHS McCloskey

Harry Mateer - Barclays Capital

Brett Levy - Jefferies & Company

Fraser Phillips - RBC Capital Markets

Vishal Gupta - Desjardins Securities

Oscar Cabrera - Meryll Lynch

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to Teck's first quarter 2010 results conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference is being recorded on Wednesday, April 21, 2010.

I would now like to turn the conference call over to Greg Waller, Vice President, Investor Relations & Strategic Analysis. Please go ahead, sir.

Greg Waller

Thanks very much. Good morning everyone and thanks for joining us this morning for our first quarter 2010 conference call. Before we start, I'd like to draw your attention to the forward-looking information slides on pages two and three of our presentation package. This presentation contains forward-looking information regarding our business. Various risks and uncertainties may cause actual results to vary. Teck does not assume any obligation to update any forward-looking statements.

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

Don Lindsay

Thank you, Greg. Good morning everyone and thank you all for joining us. There is a lot of good news to comment on today. We have hit the debt reduction targets that we originally put in place in July of 2008 and we have hit much faster than original planned in spite of this severe economic recession that we've been through.

We have investment grade ratings from three of the four North American rating agencies reflecting the progress of our debt reduction and the strength of our underlying business. Moody's report on their review is expected shortly. And we are starting to benefit from the much higher coal prices that will deliver a significant boost to our financial results in upcoming quarters.

I will start with the review of the results for the quarter and then turn the presentation over to John Gingell, our Controller and Scott Wilson, our Treasurer to address some more in-depth financial topics. Ron Millos, our Senior Vice President, Finance who usually handles this portion is currently away. There are number of other members of management team here with me on the call and they will be available to answer any questions.

Turning to slide five, there are number of highlights in the quarter. This quarter was in fact a record for the first quarter revenues at $1.9 billion and this is significant as the first quarter is usually our weakest quarter of the year due to some seasonality issues and I'll come back to this in a bit.

Operating profit before depreciation and amortization was $844 million, earnings were $908 million and EBITDA for the quarter was over $1.5 billion. I should note that we've changed our earnings reporting this quarter to the new standard for dealing with minority or non-controlling interest our reportable earning is attributable to shareholders.

We also had some unusual gains in the quarter from the [loss or] asset sales program. In (inaudible) we've achieved first concentrate production and first shipment is scheduled from next week. And in our coal business, we have contracted for most of our sales for the quarter at U.S. $200 per ton, but the more recent settlements was high as $235 per ton.

Turning to slide six, we showed you the asset sales which closed during the quarter, proceeds from these transactions were over $1 billion in the quarter and it contributed to a total from the program of approximately $1.6 billion. And I think that it's very important to note that total asset sale program got a lot of media attention, they only represented 5% of our total asset base of approximately $30 billion and none of our core assets were (inaudible). Even half of the asset program was in gold and that was something we didn't have two or three years ago. With the automation of the acquisition debt facilities, we have reached the bottom end of our original target net-debt plus equity ratio with a net-debt ratio of 25%.

Slide seven shows how we have reduced our bridge and term debt over the past 18 months. So at the end of the quarter, we have paid --- we have further paid down a term debt and we have given notice to the banks that the final payment on the term debt will made tomorrow morning. The result is that we will repay these facilities which were originally U.S. $9.8 billion completely repaid in less than 18 months.

Slide eight shows our earnings and a comparison to last year. Earnings of $908 million represent $1.54 per share, these compared to $0.50 per share last year for the same quarter. But of course we did have a very large asset sale gain this quarter.

We show our view of comparative earnings for the quarter on slide nine, the largest non-recurring items this quarter is the gain on asset sales that we recognized $639 million. With the other normal adjustments, adjusted earnings were $210 million or $0.36 per share for the quarter. Other comparative earnings factors to consider, that we don't normally accrued in the chat, but I think are important include the large SG&A expense in the quarter due to the appreciation on our stock price. Stock-based compensation and other items added about $32 million to G&A expense pre-tax, which we have not removed here in adjusted earnings, if we had this would have pushed up adjusted EPS by about $0.04 per share.

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