Inco reports lower earnings

International producer Inco (TSE) says it realized an average price for its nickel of US$3.47 per lb. during the third quarter of 1992 and US$3.51 during the first nine months, compared with US$3.90 and US$3.94, respectively, for the corresponding periods of 1991.

Third-quarter 1992 results reflected a continued deterioration of the world nickel market, says Inco, which also decided to reduce the fourth-quarter common dividend to 10 cents per share from the previous quarterly level of 25 cents per share.

High levels of nickel exports from Russia, combined with a delay in the anticipated recovery in economic conditions in the member countries of the Organization for Economic Cooperation and Development (OECD), have resulted in supply exceeding demand, inventories accumulating and prices declining sharply.

Nickel inventories on the London Metal Exchange (LME) increased by 38 million lb. during the third quarter of 1992, reaching a record level of 101 million lb. on Sept. 30, the company says. The LME 3-month nickel price, which averaged US$3.31 per lb. in the third quarter, was US$3.07 on Sept. 30. In early October, in response to market conditions, the company announced actions to reduce production and unit production costs, and to conserve cash. Capital expenditures are being curtailed, it says, and expense reductions implemented on a company-wide basis.

Net earnings for the first nine months of 1992 were $11.3 million (7 cents per share) compared with $88.4 million (81 cents per share) in the corresponding period of 1991. Net earnings for the third quarter were $10.6 million (9 cents per share) compared with US$4.5 million (3 cents per share) for the same 3-month period in 1991.

Inco says the improvement in operating earnings in the company’s primary metals business in the third quarter of 1992, compared with the third quarter of 1991, reflected reduced unit production costs, higher deliveries of company-produced nickel and improved prices for copper and cobalt, which more than offset lower realized prices for nickel.

The decrease in operating earnings for the first nine months of 1992, compared with the corresponding period in 1991, was attributed primarily to lower realized nickel prices. Third-quarter (and 9-month, 1991) results also included $18.8 million for the estimated costs of the early retirement programs in Sudbury.

The actions announced in October should reduce previously planned levels of mine production by 40 million lb. of nickel during the next 12 months, the company says. Inco expects, however, that production shutdown expense will total about $20 million in the fourth quarter of 1992, essentially reflecting the continuation of certain fixed costs during a 3-week production shutdown scheduled for December at its Canadian operating locations.