Depressed metal prices erode Noranda earnings

Though still in the black, Noranda (NOR-T) saw its second-quarter earnings dip by more than 50%.

For the three months ended June 30, the major earned $28 million (10 cents per share) on revenue of $1.5 billion, compared with $61 million (24 cents per share) on $1.7 billion in the corresponding period of 1997. The difference is attributed to depressed metal prices stemming from financial woes in Asia.

Earnings in the first half of the year totalled $638 million, largely due to $583 million gained from the sale of a 48% interest in Norcen Energy Resources. That company was sold as part of a long-term effort to focus solely on mining and metallurgical operations. Excluding the sale, the company earned $55 million (19 cents per share) in the recent 6-month period, compared with $120 million (46 cents per share) in the first half of 1997.

Cash from operations between the two 6-month periods fell to $239 million from $366 million (or to $105 million from $189 million, when working capital changes are taken into account).

Noranda invested $650 million in new projects and operations during the first half of 1998 and, at June 30, consolidated net debt as a percentage of total capitalization was reported to be 17%.

A dividend of 25 cents per share will be paid in mid-September to shareholders of record as of Aug. 28.

The company is determined to improve productivity and reduce costs at all its mining and metallurgical operations, the objective being to boost pre-tax earnings by $200 million per year by 2000.

Operational highlights in the recent quarter include: expansion of the Gasp copper smelter in Quebec to 300,000 tonnes per year; startup of construction at the Magnola magnesium plant, also in Quebec; acquisition of Fundicion Refimet, a Chilean-incorporated company that operates a 158,000-tonne-per-year copper smelter near Antofagasta; and a new ownership agreement for the Antamina copper project in Peru, involving Teck (tek-t) and Rio Algom (rom-t).

Also, labor contracts at two operations were renewed, a 2-year agreement was signed at a recycling plant in California, and a 3-year deal was concluded at the CCR copper and precious metals refinery in Quebec.