Weaker earnings hurt Inco despite improved dividend

Although the company’s quarterly dividend is being increased to 25 cents from 20 cents , Inco’s chairman Donald Phillips said that shareholder value could best be enhanced by a major share repurchase program.

The company plans to purchase up to five million of its common shares on the open market, representing about 4.8% of Inco’s issued and outstanding capital. “If nickel market conditions remain strong, we would expect to complete this new program over the next 12 months,” Phillips said.

Inco earned $129.3 million(US) or $1.23 per share, compared with $200.3 million or $1.88 per share in the same period last year. Earnings for the 9-month period were a record $601.3 million, compared with $516.4 million in the corresponding period in 1988.

Easing nickel prices and higher costs affected earnings, Inco says. During the quarter, Inco’s average realized nickel price was $5.28(US) per lb, down from $5.97 per lb in the second quarter. Deliveries of 380 million lb of nickel during the 9-month period were the highest achieved since 1974.

Higher costs and expenses were attributed to higher employment costs, increased unit costs in Manitoba due to temporarily reduced production and the processing of lower grading ore in Canada, following the phasing down of the high grading Thompson open pit mine in Manitoba. As at Sept 30, Inco’s had debt of $1.3 billion and a debt-equity ratio of 51:49. Cash and marketable securities totalled $272 million.

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