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Mining industry

Inco Reports 36% Tumble in Q1 Earnings Amid Higher Costs and Lower Copper Deliveries

Strategic Insights

— 1 min read

Canadian nickel and copper miner Inco reported a 36 per cent decline in first-quarter earnings, citing higher costs and lower copper deliveries as key factors. Despite a rise in metal prices and increased nickel production, Inco's net earnings dropped to USDollars 202m, or 91 cents a share, from USDollars 317m, or USDollars 1.43 a year earlier. The company's stock lost nearly 3 per cent to USDollars 55 in early trading, while nickel prices touched a record USDollars 18,950 a tonne on the London Metal Exchange. Inco is currently seeking regulatory approval for its USDollars 10.8bn bid for Falconbridge, another big nickel miner, but faces a potential competing bid from Xstrata.

Key Takeaways:

  • Inco's net earnings dropped 36 per cent in Q1, with net earnings of USDollars 202m, or 91 cents a share, compared to USDollars 317m, or USDollars 1.43 a year earlier.
  • The company's revenues climbed by 8 per cent, but the increase was offset by higher costs and lower copper deliveries.
  • Inco blames the rising Canadian dollar, higher energy, labour, and supply costs for the decline in earnings.
  • The company expects nickel costs to range between USDollars 2.35-USDollars 2.40 per lb for 2006 as a whole.
  • Inco's nickel output rose 11 per cent to 135m lbs, with the start-up of the Voisey's Bay mine in Labrador contributing to the increase.
  • The company projects a slight increase in production for the second quarter.
  • Inco's chief executive, Scott Hand, expressed confidence in sustained global nickel demand, driven by rising stainless steel production, orders, and prices.

Statistics:

  • Inco's net earnings: USDollars 202m (Q1 2006) vs. USDollars 317m (Q1 2005)
  • Inco's revenue growth: 8 per cent
  • Nickel costs (USDollars per lb): USDollars 2.59 (Q1 2006) vs. USDollars 2.54 (Q1 2005)
  • Nickel output: 135m lbs (Q1 2006) vs. 121.5m lbs (Q1 2005)
  • Nickel price (London Metal Exchange): USDollars 18,950 per tonne (Q1 2006)
  • Xstrata's stake in Falconbridge: 19.9 per cent
  • Xstrata's purchase price per share: CDollars 28
  • Agreement expiration date: May 14

Sources:

  • Bloomberg News
  • The Toronto Star
  • Inco's quarterly earnings report (no date)

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