Teck Resources Sees Earnings Fall In Q1 Ahead Of Shareholder Vote

Teck Resources (TSX: TECK.B) saw its revenues fall on a year over year basis in the first quarter of 2023, dropping 18% to $3.8 billion, although the quarter saw a 21% improvement over the fourth quarter results.

“We had a positive start to the year with strong financial performance in the first quarter driven by strong commodity prices and steelmaking coal sales. […] The progress in our copper growth pipeline reinforces the underlying value and optionality in our base metals business,” commented CEO Jonathan Price.

Gross profit for the quarter came in at $1.7 billion, down from $2.5 billion in the prior year, while profit from continuing operations before taxes hit $1.9 billion.

Adjusted EBITDA overall came in at $2.0 billion, down from $3.0 billion in the year ago period, and up from $1.3 billion in the fourth quarter. Basic earnings per share meanwhile amounted to $2.27, versus $2.84 in the prior year, and $0.84 in the fourth quarter.

The results come ahead of a shareholder vote that is slated to occur today related to the separation of its met coal and base metals division. Teck is wanting to divide into two firms, known as Teck Metals, which will house its base metals business, and Elk Valley Resources, which would house its met coal operations, in an effort for Teck to become more aligned with ESG investors.

Controversy surrounds the decision however as a result of an unsolicited offer that came from Glencore, whom wants to acquire Teck to effectively conduct the same separation, with the key difference being that Glencore doesn’t want to hamper the met coal spinout with a royalty of up to 90%, unlike Teck. Under the current proposed separation agreement up to 90% of the cash flows of Elk Valley would be payable to Teck Metals over the next 11 years.

The company has also reportedly been approached by Vale, Freeport McMoRan, and Anglo American, whom are interested in the base metals business of the company should its coal divisions be spun off.

In the associated earnings release, Teck notably boasted about its copper operations, identifying that its QB2 project is currently commissioning Line 1 at its concentrator as it looks to ramp operations through 2023.

Delays in completing the commissioning process however are expected to drive total capital costs to $8.2 billion instead of the projected $8.0 billion. Operations at QB2 are expected to hit full production before year end.

Teck Resources Class B shares last traded at $58.96 on the TSX.

Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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