With increased production, lower costs and rebounding nickel prices, Falconbridge (FL-T) posted better-than-expected earnings for the first three months of 2002.
The company’s consolidated net earnings for the three-month period amounted to $17.3 million (or 10 per basic and fully diluted share), compared with the $1.6 million (1 per share) earned a year earlier. Before dividend payments on preferred shares, recent earnings were $20.4 million. Year-ago first-quarter earnings had a $35.6-million bite taken out of then thanks to the six-month-long strike at the company’s Sudbury operations.
According to Reuters, seven analysts polled by Thomson Financial/First Call had forecast up to a loss of a 10 per share and a profit of 13 per share with consensus of earnings around 3 a share.
The quarter’s revenue tallied to $525.6 million, a shade of the $532.5 million in revenue the previous year. Operating profits climbed to $28.8 million from the year-ago $16.9 million. Cash from operating activities dropped to $35.7 million from $135.7 million.
Falco’s president and CEO Derek Pannell said in a prepared statement, “We have had a strong start to 2002. The high production levels we achieved in the latter part of last year continued during the first quarter and nickel prices recovered faster than expected. We are increasingly optimistic about the outlook for nickel and copper and we see some very positive trends developing for both metals.”
During the latest quarter, the company produced: 17,244 tonnes nickel (versus 15,987 tonnes in 2000); 3,102 tonnes ferronickel (7,194 tonnes); 81,270 tonnes copper (58,416 tonnes); 25,630 tonnes zinc (12,960 tonnes); and 1.2 million oz. silver (307,000 oz.). The increase in copper production reflects the addition of Chile’s Lomas Bayas production, and the resumption of normal operating levels at Sudbury.
Refined nickel production climbed 253 tonnes to 20,159 tonnes. Refined copper production soared to 63,168 tonnes from 46,495 tonnes.
Even with metal prices improving, Falconbridge realized lower prices for its metal production across the board compared with the year-ago period. The company averaged US$2.84 per lb. nickel ($3.18 per lb. a year earlier), US$2.68 per lb. ferronickel, US74 per lb. copper (US77), US39 2 per lb. zinc (US50), and US$4.44 per oz. silver (US$4.54).
Falco’s president and CEO Derek Pannell told shareholders at the company’s annual meeting on Friday, that Falconbridge and Noranda (NRD-T) will aim to work more closely together. Pannell took0 over the reigns of Falconbridge from Oyvind Hushovd in late February. Pannell is also Noranda’s president and CEO. Noranda’s stake in Falco has been creeping up over the years and now sits at 57%.
Pannell told shareholders, "It is Falconbridge that has expertise in nickel and that focus will not change. In copper we will work jointly with Noranda to gain better value and opportunities for both companies.”
On the exploration front, Falconbridge recently announced very encouraging drill results from its new discovery on the Nickel Rim South property, about 2.7 km north of the Sudbury airport. Seven of eight holes drilled so far have cut significant mineralization. Drilling with four drills continues. The company plans to complete a preliminary mineral resource estimation and economic valuation by the end of June. If positive, underground exploration would follow.
Looking to the future, Falconbridge sees improved nickel demand as stainless steel production increases with limited new nickel supply.
Falco’s board has declared dividends of 10 per common share, payable May 15, 2002, to shareholders of record May 1, 2002, and of 2 per preferred share (series 1), payable June 1, 2002, to shareholders of record May 17, 2002. For series 2 preferred shares, a dividend of 36.72 per share is payable June 1, 2002, to shareholders of record May 17, 2002.
Falco shares closed up 68 at $20.48 on the Toronto Stock Exchange on Friday. So far this year, Falconbridge shares have increased about 24%, outperforming the TSE’s metals and minerals index, which is up 15% on the year.
Be the first to comment on "Falconbridge beats the street"