Teck released its quarterly report for April-June 2022, which the company said was a fourth consecutive quarter of record profits thanks to high commodity prices.
Adjusted earnings attributable to shareholders for the entire company were five times higher than the same period last year, at $1.8 billion, largely due to the coal division.
Gross profit was $3.2 billion (vs. $689 million in Q2 21) across the company, of which $2.5 billion came from coal, breaking the record of $1.8 billion dollars in the last quarter.
“Gross profit increased significantly from $233 million in the same period last year, driven by record steelmaking coal prices, partially offset by higher unit operating costs due to inflationary pressures on costs and the effect of lower production levels,” the report read.
Realized steelmaking coal prices of $453 per ton in the quarter increased from $144 per ton in the same period last year and surpassed the previous record high of $357 per ton achieved in the first quarter of 2022. .”
Second quarter sales were about the same as last year’s second quarter, at 6.3 million tonnes and within guidance. Production was lower, at 5.3 million tonnes, but there was a backlog of inventory on site at the Elk Valley mines.
“The supply chain performed well throughout the quarter, reducing steelmaking coal inventories to near historic levels.”
According to the company, it was thanks to these supply chain improvements that allowed it to clear an inventory backlog that accumulated in late 2021 and early 2022 due to transportation issues in British Columbia, which resulted in strong sales figures.
“As a cornerstone of our supply chain transformation, our upgraded Neptune Port has improved supply chain reliability and resiliency, averting the potential revenue loss of over $1 billion. dollars since July 2021,” the report read.
As for the steelmaking coal market, a slowdown in the global economy has been singled out as the culprit for limiting profits.
“Global steelmaking coal prices are being affected by reduced downstream steel demand as weaker auto production and global inflationary pressures weigh on market sentiment which, when combined, add a pressure on steelmakers’ margins.”
Despite this, Teck’s report says the division is well positioned to continue posting strong profits in the third quarter (July-September). Due to lower inventories, sales are expected to match next quarter production between 5.8 and 6.2 million tonnes.
Finally, the company admitted it did not expect to recover production shortfalls in the first half of the year, citing workplace challenges.
“We now expect annual production to be between 23.5 and 24.0 million tonnes, below our previous forecast of 24.5 to 25.5 million tonnes.”
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