Teck Resources Ltd. will continue matching production of steelmaking coal to market demand after lower prices depressed first-quarter profits.
Chief executive officer Don Lindsay noted the uncertain economic times, but added he expects continuing growth from markets in the developing world.
“Our coal production will continue to be tailored to match market demand,” Lindsay told financial analysts on Tuesday.
“We have tremendous coal assets and we will continue to manage them for the long term,” he told a conference call after Teck reported a lower adjusted profit of $328 million.
Teck (TSX:TCK.B) said coal prices were down 28 per cent from a year ago while copper was down five per cent from the same period. Higher coal sales volumes partly offset the weaker prices.
The Vancouver mining company said the price declines reduced its revenue by about $440 million based on 2013 sales volumes.
Lindsay also said some customers want to pay spot prices rather than benchmark prices for its copper, zinc and coal. But he said that would depend on the company’s relationship with the individual customer.
“But I think, in the end, we’re going to have to follow the market. We won’t be able to be a complete outlier, but I don’t think we’ll be leading the market to go to spot only.”
Meanwhile, Lindsay described rumours that the company is considering an acquisition “grossly overblown.”
“We will always be looking at new opportunities,” he said. “But we will not pursue any transaction that doesn’t create real value for our shareholders and those opportunities are actually quite rare. We have no reason to chase marginal assets.”
In its financial results, Teck beat analyst expectations in the first quarter, although by most measures the mining company’s results were down from the same time last year.
Teck logged an adjusted profit of $328 million, or 56 cents per share, in the first quarter, down from $544 million, or 93 cents per share in the same period last year.
The consensus estimate had been for 37 cents per share of adjusted earnings.
Profit attributable to shareholders was $319 million, or 55 cents per share, compared with $258 million or 44 cents per share in the same period last year.
The consensus estimate compiled by Thomson Reuters had been for 41 cents per share of net earnings.
Teck says profit last year was affected by a $329-million after-tax charge related to debt refinancing.
The company said it achieved all-time record first quarter coal sales of 6.6 million tonnes, up 24 per cent year over year, despite relatively weak market conditions and repairs at Westshore terminals which continued into early February.
Teck said it has agreements to sell 5.4 million tonnes of coal in the second quarter at an average price of US$154 per tonne and expects total second quarter sales to be at or above six million tonnes.
Shares in Teck were off 57 cents at $25.44 in afternoon trading Tuesday on the Toronto Stock Exchange.