Canada’s largest diversified miner has warned of an after-tax loss of C$86-million, or C$0.15 a share, for the fourth quarter, which is “significantly” below current consensus estimates.
The loss warning follows the disappointing fourth-quarter financial results of Teck’s energy business unit and trail operations, as well as inventory valuations. The company said in a statement late on Thursday that these factors, together, reduced earnings by C$0.30 a share and earnings before interest, taxes, depreciation and amortisation by C$195-million.
Teck is forecasting a loss of C$92-million before depreciation and amortisation and inventory writedowns in the energy business unit.
“The dramatic widening of heavy oil differentials had a significant negative impact on our results in the quarter,” the company stated, noting that the price of Western Canadian Select (WCS) had fallen from $29.80/bl at the beginning of October, to a low of $6.42/bl in late November before recovering and ending the year at $24.66/bl, with the index averaging only $19.35/bl during the quarter.
In addition, Teck’s diluent costs increased significantly during the fourth quarter of 2018, owing to a seasonal increase in diluent consumption and an unusual widening in the spread between diluent and WCS.
The miner noted that WCS prices had increased significantly since the announcement of oil production curtailments by the Alberta government, with WCS currently sitting at $46.98/bl.
At its Trail operations in British Columbia, Teck said it would report a fourth-quarter loss of C$23-million before depreciation and amortisation and inventory writedowns, resulting in an after-tax loss of C$31-million or $0.05 a share. The trail unit continued to process low-grade lead concentrates in the fourth quarter, owing to ongoing interruptions of supply from some traditional third-party suppliers, and production was impacted by a fire in the silver refinery and a maintenance shutdown of the KIVCET furnace that continued into the fourth quarter.
Teck would also book pretax inventory writedowns of C$80-million, which it said was as a result of the decline in commodity prices during the fourth quarter.
The miner released its fourth quarter 2018 earnings results on February 13, before market opens.