Teck Resources to lay off staff, reduce spending amid global uncertainty
Teck Resources Ltd. said it would eliminate jobs, start a cost-cutting program and defer some planned capital projects amid global economic uncertainty that’s weighing on commodity prices.
The Vancouver-based company is aiming to reduce about $500 million from its spending plan through the end of 2020, according to its third-quarter results statement.
“Over the past few years, we have focused our attention on maximizing production to capture margin during periods of higher commodity prices,” said Don Lindsay, president and CEO. “However, current global economic uncertainties are having a significant negative effect on the prices for our products, particularly steelmaking coal.”
The company is focusing on a program to improve efficiency and productivity across its business, and focusing on the Quebrada Blanca Phase 2 (QB2) Project in Chile, one of the world’s largest undeveloped copper resources.
The project continues to target construction completion in the fourth quarter of 2021.
“We have also implemented a cost reduction program to reduce spending on our capital and operating costs for the balance of 2019 and 2020,” Lindsey said.
To achieve its targeted cost reductions, Teck said it will eliminate around 500 full-time jobs, “some of which we expect to come from attrition, the expiry of temporary or contract positions and current job vacancies.”
The company’s profit stood at $369 million or 66 cents per share for the quarter ended Sept. 30 compared with a profit of $1.28 billion or $2.23 per share during the same period last year.
Revenues reached $3.04 billion, lower than $3.21 billion over the period. On anadjusted basis, the company’s profit stood at $403 million or 72 cents per share, versus an adjusted profit of $466 million or 81 cents per share a year ago.
Third-quarter sales volumes of 6.1 million tonnes were nine per cent lower than a year ago and below the company guidance range of 6.3 million tonnes to 6.5 million tonnes.
The company said its sales were affected by material handling issues and planned construction outages as the facility upgrade at Neptune Bulk Terminals progressed, which limited its ability to overcome the shortfall. Efforts are focused on resolving the material handling issues.
While the results were mostly in line or ahead of the Street’s estimates, analysts were divided on how shares would trade given the capital cost escalation at its Neptune Bulk Terminals project was negative.
National Bank Financial analyst Shane Nagle thinks that shares will outperform peers as results were driven by better-than-expected cost reduction initiatives.
Teck’s balance sheet is well-positioned to weather a continued slowdown in the economy, while enabling it to remain focused on delivering growth and returning capital to shareholders, the analyst said. However, Nagle notes that the company does anticipate further capital cost escalation at its Neptune Bulk Terminals project and is expected to see higher fourth-quarter capital cost estimate for its Quebrada Blanca Phase 2 project