Teck Resources, the largest producer of steelmaking coal in North America and the second-largest exporter of seaborne steelmaking coal in the world according to the company's website, fell Monday as Chinese rebar and iron ore futures slowed for the fourth straight session on declining demand, according to Reuters.
The slowing demand for iron ore further weighed down the raw material used to make steel. Iron ore has been suffering from a growing supply in recent weeks.
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Construction in northern China has slowed in part because of cold temperatures, and demand for steel products has fallen in turn. Tight liquidity has also restricted traders' restocking in the new year, according to Reuters.
"Traders are reluctant to restock as steel demand is weakening and their cash flow remains extremely tight around this time, when banks urge loan repayments but keep cutting new credit lines," Xia Junyan, an analyst with Everbright Futures in Shanghai, told Reuters.
Separately, TheStreet Ratings team rates TECK RESOURCES LTD as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TECK RESOURCES LTD (TCK) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite currently having a low debt-to-equity ratio of 0.44, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that TCK's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.84 is high and demonstrates strong liquidity.
- TCK, with its decline in revenue, underperformed when compared the industry average of 4.0%. Since the same quarter one year prior, revenues fell by 10.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 68.5% when compared to the same quarter one year ago, falling from $267.00 million to $84.00 million.
- The gross profit margin for TECK RESOURCES LTD is currently lower than what is desirable, coming in at 33.33%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.73% significantly trails the industry average.
- You can view the full analysis from the report here: TCK Ratings Report