RNS Number:8274X
Inco Ld
20 April 2004
INCO REPORTS RESULTS FOR FIRST QUARTER OF 2004
_______________________
NET EARNINGS IN ACCORDANCE WITH CANADIAN GAAP
INCREASE MORE THAN SEVENFOLD OVER FIRST QUARTER OF 2003
(All dollar amounts are expressed in U.S. currency)
TORONTO, April 20, 2004 - Inco Limited today reported adjusted net earnings(1)
of $229 million, or $1.21 per share ($1.13 per share on a diluted basis(2)),
for the first quarter of 2004, compared with adjusted net earnings of $64
million, or 31 cents per share (30 cents per share on a diluted basis(2)), for
the first quarter of 2003. The adjustments made in arriving at adjusted net
earnings for the first quarter of 2004 reflected the exclusion of (a) favourable
non-cash currency translation adjustments relating to changes in the
Canadian-U.S. dollar exchange rate of $15 million, or eight cents per share, (b)
an after-tax gain of $6 million, or three cents per share, related to currency
hedging contracts intended to cover future expenditures which were no longer
effective given the current deferred capital expenditure profile for our Goro
project, partially offset by certain suspension costs related to that project,
and (c) an income tax benefit of $5 million, or three cents per share, covering
currency translation adjustments associated with certain of our outstanding debt
securities as a result of changes in the Canadian-U.S. dollar exchange rate. The
adjustments made in arriving at adjusted net earnings for the first quarter of
2003 primarily reflected the exclusion of (a) unfavourable non-cash currency
translation adjustments relating to changes in the Canadian-U.S. dollar exchange
rate of $78 million, or 43 cents per share, (b) an income tax benefit from
certain tax rulings and other decisions relating to transactions entered into in
prior years of $38 million, or 21 cents per share, and (c) gains from the close
out of certain currency hedges covering our Goro project of $11 million, or six
cents per share.
Net earnings for the first quarter of 2004 in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP") were $255 million, or $1.35 per
share ($1.26 per share on a diluted basis(2)), compared with net earnings of $33
million, or six cents per share (five cents per share on a diluted basis(2)), in
accordance with Canadian GAAP for the first quarter of 2003. All of the
adjustments made in arriving at adjusted net earnings for the first quarters of
2004 and 2003 are set forth under "Reconciliation Between Adjusted Net Earnings
and Net Earnings in Accordance with Canadian GAAP" below.
________________________________________
(1) The adjusted net earnings reported in this release have not been
calculated in accordance with Canadian GAAP, the accounting principles under
which our consolidated financial statements are prepared, and there is no
standard definition in such principles for such adjusted net earnings or loss.
Accordingly, it is unlikely that comparisons can be made among different
companies in terms of such adjusted results reported by them. A reconciliation
of adjusted net earnings to net earnings in accordance with Canadian GAAP
appears below as well as an explanation of why we believe adjusted net earnings
is useful information.
(2) The calculation of adjusted net earnings per share and net earnings per
share in accordance with Canadian GAAP on a diluted basis takes into account the
dilutive effect of our outstanding warrants, share options and convertible
debentures. The amount of dilution per share due to these items is dependent on
our level of earnings and the price of our common shares.
Chief Executive Officer's Message
Inco enjoyed a strong first quarter for 2004 as a result of high metal prices
and improved nickel production and deliveries. Nickel production increased by 15
per cent and Inco-source nickel deliveries grew by 19 per cent for the quarter
compared with the first quarter of 2003. We are on track to hit our highest
annual nickel production levels in nearly thirty years. With strong nickel
markets currently expected to continue for the foreseeable future, we anticipate
that 2004 will be an excellent year for Inco.
Market outlook remains positive
The London Metal Exchange cash nickel price for the first quarter of 2004
averaged $6.68 per pound, the third highest quarterly average price for this
terminal market for nickel in its history. Strong supply-demand fundamentals
also led to increased prices for copper, cobalt and platinum during the quarter.
The favourable nickel price environment in the first quarter of 2004 prevailed
in spite of increases in the availability of nickel-containing stainless steel
scrap and destocking by end users of nickel as a result of the sharp run-up in
nickel prices in late 2003 and into January 2004. Current economic indicators
show a moderate to strong recovery in the Western economies for 2004 and for the
first time in more than three years China is not expected to be the only key
driver of growth in the global nickel market. We expect that the U.S., Japan and
Europe, which together make up almost two-thirds of global nickel demand, will
contribute meaningfully to growth in demand in 2004. Our overall forecast for
2004 remains largely unchanged and we continue to project that world nickel
demand will increase in 2004 from 2003 levels, with growth in demand limited by
available supply.
In this tight nickel market that we see today - and that we expect to prevail
for some time to come - Inco is continuing to do all that we can to satisfy our
customers' needs.
Production and costs
During the first quarter of 2004, we produced 127 million pounds of nickel. Our
full-year 2004 forecast is to produce 500 to 510 million pounds of nickel, our
highest annual production since 1974. Our target is to raise production by up to
another five per cent if possible, both to improve our bottom line and to meet
our customers' needs.
We produced 147,000 troy ounces of platinum-group metals (PGMs) in the first
quarter. Our increased PGMs production and improved prices for platinum resulted
in higher by-product credits.
We are committed to working hard to reduce costs and improve productivity in
good markets as well as bad. In the first quarter of 2004, we realized cost
reductions of almost $10 million, or $0.08 per pound of nickel produced, and we
are on track to deliver on our promise of $63 million in cost reductions for
2004. However, this cost reduction target may be offset due largely to the
higher volumes of and costs associated with the purchased feeds we are
processing in Canada until we begin shipment of intermediate nickel concentrates
from our Voisey's Bay project, currently expected to begin in 2006. We continue
to be challenged on the cost front but will devote the resources needed to
overcome these challenges. Some of the steps we have taken in the quarter to
meet these challenges include improved nickel and copper separation at our matte
processing plant in Sudbury and reducing in-process inventories by cutting
recycling time for downstream processing.
In our Ontario operations, nickel production was 60 million pounds, slightly
above what was included in our guidance in early February. This higher
production was due to a number of positive steps taken, including improvements
in recoveries and concentrate grades at our Clarabelle mill. Production at our
Manitoba operations was 28 million pounds, slightly below our early February
guidance due mainly to the shipment of two million pounds of nickel to our new
shearing plant in Dalian, China for final shearing and, accordingly, this
material was not included in finished production for the quarter.
Finished nickel production from the nickel-in-matte produced by PT Inco totalled
39 million pounds in the quarter, essentially in line with our early February
guidance. By the end of 2004, we hope to generate an additional 10 megawatts of
power at PT Inco which should further boost its production. We are currently
exploring the potential for building a third dam to raise PT Inco's
hydroelectric power generating capacity by 90 megawatts to 365 megawatts. This
enhanced capacity could support an increase in annual production by PT Inco to
200 million pounds of nickel-in-matte by 2009 and could also reduce PT Inco's
unit cash cost of sales by an estimated $0.10 to $0.15 a pound.
Our refineries in Canada and the U.K. operated very well during the quarter.
Progress on growth projects
We continue to make solid progress on our Voisey's Bay project. Our 2004
construction program in northern Labrador is well underway. This year we plan to
finish engineering and procurement and get all of the required equipment to the
site. Our construction will focus on completing foundations, finishing building
structures, and cladding the concentrator building. Our research and development
program to test hydrometallurgical processes continues to meet its objectives
and we have completed preliminary engineering and costing for the planned
demonstration plant for scale-up and testing of these processes in Argentia on
the island of Newfoundland. We currently project that the Phase 1 mine and
concentrator will be ready for commissioning by late 2005.
At our Goro project, we are making good progress on Phase Two of our project
review. We currently expect to give a progress report in late May which will
include an updated potential capital cost estimate for the project within a plus
or minus 25 per cent range. By the end of August, the project capital cost
estimate for Goro should be within the minus 5 per cent to plus 15 per cent
range. We remain optimistic that we will be able to reach a decision to proceed
with Goro by the end of August. Our discussions have continued with the
Government of France on an increase in its $350 million financing commitment for
Goro by giving financial assistance to a firm that would build a power plant to
supply the project.
Building on a strong financial foundation
We generated $380 million of cash flow from operations during the first quarter
of 2004. Our financial leverage remains low at a 26 per cent
debt-to-capitalization ratio and our cash position at the end of the quarter was
$596 million, up from $418 million at the end of 2003.
With our combination of strong operations, a leading marketing position, and
outstanding prospects for profitable growth, Inco is ideally positioned to
benefit from strong nickel markets today and in the future.
We are pleased with our progress this quarter and I look forward to reporting on
our performance for the second quarter of 2004.
Scott Hand
Chairman and Chief Executive Officer
Reconciliation Between Adjusted Net Earnings and Net Earnings in Accordance with
Canadian GAAP
We define adjusted net earnings and adjusted net earnings per share as a
calculation of net earnings that excludes items that, because of the nature,
timing or extent of such items, we believe do not reflect or relate to our
ongoing operating performance. Accordingly, the items that are excluded from
this calculation would include non-cash currency translation adjustments
relating principally to liabilities that are not expected to be discharged or
settled for a number of years, income tax benefits (charges) relating to the
impact of currency translation adjustments and adjustments for tax rulings and
other decisions and interpretations covering transactions in prior periods and
for revaluation of recorded future tax liabilities due to changes in laws or
regulations affecting future tax rates, interest income associated with tax
refunds, project suspension and similar costs, including related project
currency hedging gains and losses, asset impairment charges, losses or gains on
debt retirements, strike expenses, gains and losses of a non-recurring nature
and, for earnings per share calculations, the premium payable on preferred share
redemptions. The determination of which items to exclude when calculating
adjusted net earnings involves the application of judgment by us.
The following table provides for the periods indicated a reconciliation between
our adjusted net earnings and net earnings as reported in accordance with
Canadian GAAP:
(in millions except per Net Earnings Earnings Per Share
share amounts)
----------------------- --------------------- -----------------------
For the three months 2004 2003 2004 2003
ended March 31, (Restated)(1) (Restated)(1)
----------------------- --------------------- -----------------------
Adjusted net earnings $ 229 $ 64 $ 1.21 $ 0.31
Currency translation 15 (78) 0.08 (0.43)
adjustments
Goro project suspension 6 11 0.03 0.06
costs and related
currency hedging gains,
net
Income tax benefits 5 38 0.03 0.21
Loss on redemption of - (2) - (0.01)
convertible debentures
Redemption premium on - - - (0.08)
Series E Preferred
Shares
--------------------- --------- -------- --------- ---------
Canadian GAAP net $ 255 $ 33 $ 1.35 $ 0.06
earnings, as reported
--------------------- --------- -------- --------- ---------
_____________________
(1) The first quarter 2003 results have been restated due to the retroactive
application of a change in accounting policy for depreciation and depletion.
We believe that the reporting of adjusted net earnings, a calculation that, as
noted above, excludes non-cash currency translation adjustments and other items
that, given their nature, timing or extent, may obscure trends in the
performance of our operations or otherwise not be representative of our ongoing
operations, provides our shareholders and other investors with a potentially
useful picture that eliminates the volatility of such items, whether they are
favourable or unfavourable, and may assist them in assessing our operating
performance. In addition, management uses such information internally for
operating, budgeting and financial planning purposes. We also believe that
providing the First Call consensus mean estimate for cash flow per share, as
discussed under "Outlook" below, provides our shareholders and other investors
with potentially useful information concerning projected cash flow generation by
our operations based upon certain third party assumed metals prices and other
data.
Outlook
Our current estimates for production for the second quarter of 2004 and the full
year 2004 of nickel, copper and platinum-group metals ("PGMs"), including PGMs
produced from purchased material, are as follows:
Second Quarter Full Year
2004 2004
-------------------------- ---------------------
Nickel - tonnes (thousands) 59 227 to 231
- pounds (millions) 130 500 to 510
Copper - tonnes (thousands) 30 118
- pounds (millions) 66 260
PGMs - troy ounces (thousands) 60 400
The expected decline in PGMs in the second quarter of 2004 from the first
quarter level is due to the processing in the first quarter of 2004 of the
unusual build-up of PGMs-bearing material as a result of the three-month strike
at our Ontario operations in 2003, the significant amount of time it normally
takes to ramp-up production of new PGMs-bearing material after a strike and
certain processing plant problems that occurred in the first quarter that have
since been resolved.
We currently project that our nickel unit cash cost of sales after by-product
credits for the full year 2004 will be about $2.25 to $2.35 per pound ($4,961 to
$5,181 per tonne). It should be recognized how sensitive this estimate is to the
volume of and realized prices for by-products. We do not provide a
reconciliation of our estimate of nickel unit cash cost of sales after
by-product credits for 2004 to cost of sales under Canadian GAAP since such a
reconciliation would require an unreasonable effort on our part and such an
estimate of cost of sales in accordance with Canadian GAAP would require us to
publicly forecast certain nickel prices which, as discussed below, would be
contrary to our policy. A reconciliation between our nickel unit cash costs of
sales both before and after by-product credits as indicated for the first
quarters of 2004 and 2003 and cost of sales in accordance with Canadian GAAP is
set forth in the table entitled "Reconciliation of Nickel Unit Cash Cost of
Sales to Canadian GAAP Cost of Sales" below.
The premium on our nickel products for 2004 we currently expect to realize over
the London Metal Exchange ("LME") cash nickel prices is currently projected to
be between $0.00 and $0.06 per pound ($0 and $132 per tonne). Our premiums are
affected by fluctuations in the LME cash nickel price and the effect this has on
the price we receive for the matte product produced by PT International Nickel
Indonesia Tbk ("PT Inco"), the lag effect that changes in the LME benchmark
price have on the pricing of certain of our nickel products, and how certain of
our specialty nickel products are priced. As reflected in the chart above and
the statements above on PGMs production, we have historically experienced, and
expect to continue to experience, some quarter-to-quarter variability in
production levels of our primary metals products due to planned maintenance
shutdowns of operations and other normal planned actions.
The current First Call consensus mean estimate for our adjusted net earnings per
share for 2004 is $4.13 on a diluted basis. The current First Call consensus
mean estimate for Inco's cash flow per share, which we understand is defined as
cash flow from operations before changes in working capital, investing and
financing activities, divided by diluted common shares outstanding, for 2004 is
$6.59 on a diluted basis. Based upon the current First Call mean forecast for
the average LME cash nickel price for 2004, which we understand to be $6.39 per
pound, and our understanding of First Call's latest mean forecasts for 2004 for
the prices for our other metal products, we are comfortable with the current
First Call consensus estimate for 2004 for our adjusted net earnings per share
of $4.13, on a diluted basis, and with the current First Call consensus estimate
for 2004 for our cash flow per share, as defined above, of $6.59 on a diluted
basis. We are not endorsing First Call's mean forecasts for the LME cash nickel
price and other benchmark metal prices for 2004. Our policy continues to be that
we do not publicly forecast where nickel and other metal prices will be in the
future given the historic volatility of these prices and the level of economic
uncertainty that currently exists in at least some of our key geographic
markets. The LME cash nickel price averaged $6.59 per pound ($14,527 per tonne)
for the January 2 - April 20, 2004 period. The LME cash nickel price on April
20, 2004 was $5.83 per pound ($12,860 per tonne).
The earnings per share consensus mean estimate above refers to an estimate for
adjusted net earnings and excludes certain adjustments that would be made in the
calculation of net earnings in accordance with Canadian GAAP. Since such a
reconciliation would require an unreasonable effort on our part and would also
involve making such adjustments to include assumptions or forecasts relating to
changes in the Canadian-U.S. dollar exchange rate and other currency exchange
rate changes and other external factors that we do not believe we are in a
position to predict with any degree of certainty, we do not provide a
reconciliation between any adjusted net earnings estimate and a corresponding
net earnings estimate in accordance with Canadian GAAP. Similarly, we do not
provide a reconciliation between the First Call cash flow per share consensus
mean estimate and a corresponding cash flow per share estimate in accordance
with Canadian GAAP since it would also require an unreasonable effort on our
part and would require certain assumptions or forecasts that we are not in a
position to make or predict with any degree of certainty.
In terms of the current estimated sensitivity of our earnings per share to
changes in nickel prices, for every change of 10 cents, up or down, per pound in
our realized nickel price over a full year, our Canadian GAAP basic net earnings
per share (EPS) over a full year would change, up or down, by about 12 cents. As
reflected in the table below, while our financial results are most sensitive to
changes in (1) the Canadian-U.S. dollar exchange rate given that a substantial
portion of expenses are incurred in Canadian dollars and we have substantial
Canadian dollar-denominated liabilities and (2) nickel prices, our results are
also sensitive to changes in copper and other prices and also, on the cost side,
to changes in oil and natural gas prices and changes in our share price given
how we account for share appreciation rights granted in connection with certain
share options:
ESTIMATES OF CURRENT 2004 SENSITIVITY OF EPS(1) TO CERTAIN
METALS PRICES AND OTHER CHANGES
OVER ONE YEAR (IN U.S.$)
Amount of Change
(up or down) EPS Effect(1)
Realized nickel price $ 0.10/lb. $ 0.12
Realized copper price 0.10/lb. 0.09
Realized palladium price 50.00/troy oz 0.03
Realized platinum price(2) 50.00/troy oz 0.03
Realized cobalt price 1.00/lb. 0.01
Cdn.-U.S. exchange rate(3) (4) 0.01 0.12
Fuel oil price
(West Texas Intermediate) (2) (4) 1.00/bbl 0.006
Natural gas price(2) (4) 0.10/MM BTU 0.001
Share appreciation rights(4) (5) 1.00 0.006
___________
(1) Canadian GAAP basic net earnings per share. Each sensitivity assumes other
factors are held constant.
(2) Includes the impact of hedging activities as of March 31, 2004.
(3) The EPS effect represents (a) $0.05 for a non-cash balance sheet
translation effect relating to Canadian dollar-denominated liabilities, (b)
$0.02 relating to accrued taxes for Canadian dollar currency translation gains
associated with U.S. dollar-denominated liabilities and (c) $0.05 for operating
cost translation effect.
(4) Increases in these costs, exchange rates and our share price have a
negative effect on EPS.
(5) Reflects the effect on EPS of a change in our common share price on our
expense accrual for share appreciation rights granted in connection with certain
share options.
Our capital expenditures for our existing operations and growth projects are
also sensitive to changes in exchange rates depending upon the currency in which
such expenditures are incurred. We currently project that our total capital
expenditures for 2004 will be about $1 billion.
Commentary on Results for the First Quarter of 2004
(Tabular amounts are in millions of U.S. dollars
except per share amounts)
Results of operations
The following table summarizes our results in accordance with Canadian GAAP for
the periods indicated:
Three months ended March 31, 2004 2003
(Restated)
-------------------------------- --------- ---------
Net sales $ 1,094 $ 593
Net earnings 255 33
Net earnings per common share
- basic 1.35 0.06
- diluted 1.26 0.05
Cash provided by (used for) operating 380 (98)
activities --------- ---------
--------------------------------
The significant increase in net earnings and certain changes in costs between
the first quarter of 2004 and the corresponding quarter of 2003 were primarily
the result of the following factors:
* Higher average realized prices for all metals except palladium,
particularly for nickel and copper
* Higher deliveries of Inco-source nickel and PGMs
* The reduced impact of currency translation adjustments, particularly
the effect of changes in the Canadian-U.S. dollar exchange rate
* Increased costs for nickel production
* Increased selling, general and administrative expenses and research and
development expenses
* Lower other income
Net sales
Net sales increased substantially to $1,094 million in the first quarter of
2004, compared with $593 million in the first quarter of 2003, primarily as a
consequence of higher selling prices for nickel and copper as well as higher
deliveries of Inco-source nickel and PGMs. Deliveries of Inco-source nickel in
the first quarter of 2004 increased by 19 per cent compared with the first
quarter of 2003 due to increased production at the Canadian and U.K. operations
as well as at PT Inco. Deliveries of copper decreased as a result of lower
copper production at our Canadian and U.K. operations than in the first quarter
of 2003 when we processed an unusual level of copper-containing in-process
material.
Costs and expenses
Cost of sales and other expenses
Nickel unit cash cost of sales before by-product credits increased to $5,335 per
tonne ($2.42 per pound) in the first quarter of 2004 from $4,101 per tonne
($1.86 per pound) in the first quarter of 2003. This increase was principally
due to the strengthening of the Canadian dollar as well as higher costs for, and
volumes of, purchased intermediates, partially offset by the cost reductions as
discussed below.
We use purchased intermediates to increase processing capacity utilization at
our Canadian operations. While the cost of purchased intermediates is higher
than that for processing our own mine production and such cost increases as the
prevailing prices, LME cash nickel or other benchmark prices, on which this
material is purchased by us increases, the price realizations are also higher,
resulting in margins on these purchases remaining relatively unchanged.
In the first quarter of 2004, we realized cost reductions of almost $10 million,
and we are currently on track to deliver the planned $63 million in cost
reductions for the full year 2004.
Nickel unit cash cost of sales after by-product credits was relatively unchanged
at $4,410 per tonne ($2.00 per pound) in the first quarter of 2004 compared with
$4,432 per tonne ($2.01 per pound) in the first quarter of 2003. Nickel unit
cash cost of sales after by-product credits for the first quarter of 2004
reflected the very significant favourable effect of by-product credits,
including the level of PGMs produced in the quarter.
A reconciliation of our nickel unit cash cost of sales before and after
by-product credits to cost of sales under Canadian GAAP is shown in the table
entitled "Reconciliation of Nickel Unit Cash Cost of Sales to Canadian GAAP Cost
of Sales" below.
Nickel production increased by 15 per cent to 57,671 tonnes (127 million pounds)
in the first quarter of 2004, compared with 50,228 tonnes (111 million pounds)
in the first quarter of 2003, reflecting higher production at our Canadian and
U.K. operations resulting primarily from higher volumes of purchased
intermediates processed and a drawdown of in-process inventory. PT Inco's
production increased during the first quarter of 2004 compared with the first
quarter of 2003 when a planned furnace rebuild at this operation reduced
production.
Depreciation and depletion expense
During the first quarter of 2004, the staff of the U.S. Securities and Exchange
Commission ("SEC") undertook a routine review of certain reports we filed with
the SEC in 2003. Upon the completion of that review, as discussed under
"Accounting Changes" below, we implemented changes on a retroactive basis for
Canadian GAAP purposes, to be effective January 1, 2004, in our depreciation and
depletion methodology so that such methodology is consistent for purposes of
both U.S. GAAP and Canadian GAAP. As a result of these changes, depreciation and
depletion expense decreased by $15 million in the first quarter of 2004 compared
with what that expense would have been based upon the previous methodology we
used for Canadian GAAP purposes and this expense was restated under Canadian
GAAP and U.S. GAAP for 2003.
Selling, general and administrative expenses
Selling, general and administrative expenses increased by $10 million in the
first quarter of 2004 primarily due to higher accruals and payments under our
incentive compensation programs as a result of higher levels of earnings.
Currency translation adjustments
Currency translation adjustments represented primarily the effect of exchange
rate movements on the translation of Canadian dollar-denominated liabilities,
principally post-retirement benefits, accounts payable and deferred income and
mining taxes, into U.S. dollars. Favourable currency translation adjustments of
$15 million in the first quarter of 2004 were due to the weakening of the
Canadian dollar relative to the U.S. dollar. The Canadian - U.S. dollar exchange
rate was $0.763 at March 31, 2004 compared to $0.774 at December 31, 2003,
representing approximately a one per cent depreciation.
Income and mining taxes
The effective tax rate for the first quarter of 2004 was 35.6 per cent which was
lower than the statutory income tax rate in Canada of 39.9 per cent. The lower
rate was primarily due to the impact of earnings generated in lower tax rate
jurisdictions and the effect of currency translation adjustments. The effective
tax rate for the first quarter of 2003 was significantly impacted by a $38
million tax benefit from certain tax rulings and other decisions relating to
prior year transactions as well as the benefit of non-taxable gains.
Cash Flows and Financial Condition
Net cash provided by operating activities, after changes in working capital, in
the first quarter of 2004 was $380 million, compared with a use of cash of $98
million in the first quarter of 2003. The increase in net cash provided by
operating activities was primarily due to higher earnings and significantly
lower taxes paid during the first quarter of 2004 compared with the first
quarter of 2003.
Net cash used for investing activities increased slightly to $167 million in the
first quarter of 2004 compared with $164 million in the same period of 2003.
During the first quarter of 2004, we used cash of $28 million to acquire an
additional two per cent of the issued and outstanding shares of PT Inco from a
shareholder, increasing our ownership of PT Inco to approximately 61 per cent.
Capital expenditures in the first quarter of 2004 were lower than in the first
quarter of 2003 due to lower spending in respect of the Goro project partially
offset by higher spending in respect of the Voisey's Bay project.
Net cash used for financing activities was $35 million in the first quarter of
2004 which primarily related to scheduled loan repayments of $46 million which
was partially offset by the receipt of $12 million in respect of the exercise of
employee stock options.
At March 31, 2004, cash and cash equivalents were $596 million, up from $418
million at December 31, 2003, reflecting the cash provided from operating
activities as discussed above. Total debt was $1,468 million at March 31, 2004,
compared with $1,512 million at December 31, 2003. Total debt as a percentage of
total debt plus shareholders' equity was 26 per cent at March 31, 2004, compared
with 28 per cent at December 31, 2003. Under Canadian GAAP, a substantial
portion of our convertible debt is recorded as equity and not debt.
Accounting changes
(a) Depreciation and depletion expense
Effective January 1, 2004 on a retroactive basis, we changed the method by which
we calculate depreciation and depletion expense. Under the previous method, we
depleted mine development costs on a composite basis. Total historical
capitalized costs and estimated future development costs relating to our
developed and undeveloped reserves were depleted using the unit-of-production
method based on total developed and undeveloped proven and probable reserves in
our twenty-year plan. Under the revised method, depletion of the deferred mine
development costs is calculated on a unit-of-production basis over the estimated
proven and probable ore reserves which relate to the particular category of
development, either life of mine plan or area-specific. No future development
costs are taken into account in calculating the depletion charge. In addition,
the depreciation method for certain other assets of our 61 per cent owned
subsidiary, PT Inco, have been changed to a straight line basis to conform the
depreciation method used to the depreciation methods generally used for similar
assets in our other locations.
Adoption of this change in accounting policy also removes a significant
difference between Canadian GAAP and U.S. GAAP insofar as they affect our
consolidated financial statements. The impact of this change on first quarter
2004 depreciation and depletion expense was a reduction of $15 million in such
expense (for the first quarter of 2003 - $9 million).
(b) Generally accepted accounting principles
Effective January 1, 2004, we adopted Canadian Institute of Chartered
Accountants ("CICA") section 1100, Generally Accepted Accounting Principles.
CICA section 1100 describes what constitutes Canadian GAAP and its sources.
Adoption of this section did not have a significant impact on our results of
operations or financial condition.
(c) Hedging Relationships
Effective January 1, 2004, we adopted a new accounting guideline issued by the
CICA in respect of hedging relationships which provided guidance concerning
documentation and effectiveness testing for derivative contracts. Adoption of
this guideline did not have a significant impact on our results of operations or
financial condition.
Access to Webcast of First Quarter 2004 Results Presentation to Investment
Community
As previously announced, interested investors can listen to our presentation to
the investment community covering our first quarter 2004 financial and operating
results on a live, listen-only basis, or access the archival webcast or the
recording of the presentation through the Internet or by calling the toll-free
telephone call in North America as indicated below.
The presentation is scheduled for April 21, 2004 beginning at 3:00 p.m. (Toronto
time) and can be accessed by visiting the website of a third-party webcasting
service we will be using, Canada NewsWire Ltd., at www.newswire.ca/webcast, at
least five minutes before the start of the presentation. Slides or other
statistical information to be used for the presentation can be accessed and will
be available for online viewing through www.newswire.ca/webcast on the event
title or through our website, www.inco.com, by clicking on the "Latest Quarterly
Webcast" link on the homepage.
The archival webcast of the presentation can be accessed via the Internet
through www.newswire.ca/webcast. A recording of the presentation can be listened
to until 11:59 p.m. (Toronto time) on May 5, 2004 by dialling 1-800-558-5253 in
North America and by entering the reservation number 21188985. This recording is
also available outside North America by dialing 416-626-4100.
This news release contains forward-looking statements regarding the Company's
costs, its position as a low-cost producer of nickel, production levels for
nickel, copper and platinum-group metals for its second quarter and full year
2004 at its Canadian, Indonesian and other operations, nickel demand and supply
both globally and for certain markets, premiums realized on its metals prices,
nickel unit cash cost of sales after by-product credits, its financial results,
including cash flow from operations, the sensitivity of financial results to
changes in nickel and other metal prices, exchange rates, energy and other costs
and its common share price, cost reduction objectives, its Goro and Voisey's Bay
projects, process research and development programs, capital expenditures,
planned shutdowns and other issues and aspects relating to its business and
operations. Inherent in those statements are known and unknown risks,
uncertainties and other factors well beyond the Company's ability to control or
predict. Actual results and developments may differ materially from those
contemplated by these statements depending on, among others, such key factors as
business and economic conditions in the principal markets for the Company's
products, the supply, demand and prices for metals to be produced, purchased
intermediates and nickel-containing stainless steel scrap and other substitutes
and competing products for the primary metals and other products the Company
produces, developments concerning labour relations, the Company's deliveries,
production levels, production and other anticipated and unanticipated costs and
expenses, metals prices, premiums realized over LME cash and other benchmark
prices, tax benefits and charges, changes in tax legislation, hedging
activities, the Canadian-U.S. dollar and other exchange rates, changes in the
Company's common share price, the completion and results of a comprehensive
review of the capital costs, scope, schedule, and other key aspects of the Goro
project, the timing of receipt of all necessary permits and governmental,
regulatory and other approvals, and engineering and construction timetables, for
the Voisey's Bay and Goro projects, the necessary financing plans and
arrangements for, and joint venture, partner or similar investments and other
agreements and arrangements associated with, the Goro project, political unrest
or instability in countries such as Indonesia, risks involved in mining,
processing and exploration activities, market competition and other risk factors
listed from time to time in the Company's reports filed with the U.S. Securities
and Exchange Commission. The forward-looking statements included in this release
represent the Company's views as of the date of this release. While the Company
anticipates that subsequent events and developments may cause the Company's
views to change, the Company specifically disclaims any obligation to update
these forward-looking statements. These forward-looking statements should not be
relied upon as representing the Company's views as of any date subsequent to the
date of this release.
April 20, 2004
IN 04/05
For further information:
Media Relations: Steve Mitchell (416) 361-7950
Investor Relations: Sandra Scott (416) 361-7758
or www.inco.com
Inco Limited
Key Financial and Operating Statistics
Three Months Ended March 31, 2004 2003
--------- ----------
Average Realized Prices
Nickel(1) - per tonne $ 14,660 $ 8,582
- per pound 6.65 3.89
Copper - per tonne 2,793 1,714
- per pound 1.27 0.78
(1) Including intermediates
LME Average Cash Prices
Nickel - per tonne 14,737 8,346
- per pound 6.68 3.79
Copper - per tonne 2,731 1,663
- per pound 1.24 0.75
Deliveries
Nickel in all forms (tonnes)
- Inco-source 54,617 45,870
- Purchased finished 6,183 7,968
--------- ----------
60,800 53,838
--------- ----------
Copper (tonnes) 29,740 36,253
--------- ----------
Cobalt (tonnes) 392 326
--------- ----------
Platinum-group metals (in thousands of troy ounces) 147 88
--------- ----------
Nickel production in all forms (tonnes) 57,671 50,228
--------- ----------
Finished nickel inventories at end of period (tonnes) 29,177 27,473
--------- ----------
Reconciliation of Nickel Unit Cash Cost of Sales to Canadian GAAP Cost of Sales
Three Months Ended March 31, 2004 2003
-------------------------------------------------
(in millions of U.S. dollars except where noted)
-------------------------------------------------
Cost of sales and other
expenses, excluding
depreciation and depletion $ 557 $ 419
By-product costs (139) (137)
Purchased finished nickel (90) (66)
Delivery expense (8) (6)
Other businesses (11) (6)
Non-cash items1 (9) (5)
Remediation, demolition and (5) (4)
other related expenses
Other (5) (7)
--------- ----------
Nickel cash cost of sales 290 188
before by-product credits2
By-product net sales (189) (122)
By-product costs 139 137
--------- ----------
Nickel cash cost of sales $ 240 $203
after by-product credits2 ========= ==========
Inco-source nickel deliveries 120 101
(millions of pounds) ========= ==========
Nickel cash cost of sales $ 2.42 $ 1.86
before by-product credits per ========= ==========
pound
Nickel cash cost of sales $ 5,335 $ 4,101
before by-product credits per ========= ==========
tonne
Nickel cash cost of sales $ 2.00 $ 2.01
after by-product credits per ========= ==========
pound
Nickel cash cost of sales $ 4,410 $ 4,432
after by-product credits per ========= ==========
tonne
Inco Limited
Consolidated Statement of Earnings
(unaudited)
For the three months ended March 31, 2004 2003
(in millions of U.S. dollars except per share amounts)
------------------------------------ -------- --------
(Restated)
Revenues
Net sales $ 1,094 $ 593
Other income, net 5 28
------------------------------------ -------- --------
1,099 621
------------------------------------ -------- --------
Costs and expenses (income)
Cost of sales and other expenses, excluding depreciation 557 419
and depletion
Depreciation and depletion 57 54
Selling, general and administrative 34 24
Research and development 9 5
Exploration 6 6
Currency translation adjustments (15) 78
Interest expense 8 14
Goro project suspension (6) -
------------------------------------ -------- --------
650 600
------------------------------------ -------- --------
Earnings before income and mining taxes and minority 449 21
interest
Income and mining taxes 160 (23)
------------------------------------ -------- --------
Earnings before minority interest 289 44
Minority interest 34 11
------------------------------------ -------- --------
Net earnings 255 33
Dividends on preferred shares - (6)
Accretion of convertible debt (2) (2)
Premium on redemption of preferred shares - (15)
------------------------------------ -------- --------
Net earnings applicable to common shares $ 253 $ 10
------------------------------------ -------- --------
Net earnings per common share
Basic $ 1.35 $ 0.06
------------------------------------ -------- --------
Diluted $ 1.26 $ 0.05
------------------------------------ -------- --------
Inco Limited
Consolidated Balance Sheet
(unaudited)
March 31, December 31,
(in millions of U.S. dollars) 2004 2003
--------------------------------- ---------- -----------
(Restated)
ASSETS
Current assets
Cash and cash equivalents $ 596 $ 418
Accounts receivable 494 435
Inventories 843 746
Other 148 112
--------------------------------- ---------- -----------
Total current assets 2,081 1,711
Property, plant and equipment 7,072 7,033
Deferred charges and other assets 329 319
--------------------------------- ---------- -----------
Total assets $ 9,482 $ 9,063
--------------------------------- ---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Long-term debt due within one year $ 101 $ 103
Accounts payable 287 253
Accrued payrolls and benefits 166 165
Other accrued liabilities 309 332
Income and mining taxes payable 195 27
--------------------------------- ---------- -----------
Total current liabilities 1,058 880
Deferred credits and other liabilities
Long-term debt 1,367 1,409
Deferred income and mining taxes 1,703 1,706
Post-retirement benefits 604 603
Asset retirement obligation 142 141
Minority interest 453 442
--------------------------------- ---------- -----------
Total liabilities 5,327 5,181
--------------------------------- ---------- -----------
Shareholders' equity
Convertible debt 609 606
--------------------------------- ---------- -----------
Common shareholders' equity
Common shares issued and outstanding
187,415,808
(2003 - 186,915,865 shares) 2,872 2,858
Warrants 62 62
Contributed surplus 565 562
Retained earnings (deficit) 47 (206)
--------------------------------- ---------- -----------
3,546 3,276
--------------------------------- ---------- -----------
Total shareholders' equity 4,155 3,882
--------------------------------- ---------- -----------
Total liabilities and shareholders' equity $ 9,482 $ 9,063
--------------------------------- ---------- -----------
Inco Limited
Consolidated Statement of Cash Flows
(unaudited)
Three months ended March 31, 2004 2003
(in millions of U.S. dollars)
--------------------------------- ---------- ----------
(Restated)
Operating activities
Earnings before minority interest $ 289 $ 44
Charges not affecting cash
Depreciation and depletion 57 54
Deferred income and mining taxes 16 20
Other 3 32
Decrease (increase) in non-cash working capital
related to operations
Accounts receivable (59) (70)
Inventories (97) (20)
Accounts payable and accrued liabilities 42 (41)
Income and mining taxes payable 168 (121)
Other (34) (9)
Other (5) 13
--------------------------------- ---------- ----------
Net cash provided by (used for) operating 380 (98)
activities
--------------------------------- ---------- ----------
Investing activities
Capital expenditures (139) (163)
Other (28) (1)
--------------------------------- ---------- ----------
Net cash used for investing activities (167) (164)
--------------------------------- ---------- ----------
Financing activities
Repayments of long-term debt (46) (46)
Convertible debt issued - 470
Common shares issued 12 4
Preferred dividends paid - (6)
Dividends paid to minority interest (1) (1)
--------------------------------- ---------- ----------
Net cash provided by (used for) financing (35) 421
activities
--------------------------------- ---------- ----------
Net increase in cash and cash equivalents 178 159
Cash and cash equivalents at beginning of 418 1,087
period
--------------------------------- ---------- ----------
Cash and cash equivalents at end of period $ 596 $ 1,246
--------------------------------- ---------- ----------
--------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRFFGGZDMGKGDZZ
Inco (LSE:IN.)
과거 데이터 주식 차트
부터 4월(4) 2024 으로 5월(5) 2024
Inco (LSE:IN.)
과거 데이터 주식 차트
부터 5월(5) 2023 으로 5월(5) 2024
