Release: PT Inco announces strong second quarter 2005 results
Wednesday, July 27 2005 - 10:36 AM WIB
Sales rose 17.7% to $434.3 million in the first six months of 2005 from $369 million in the same period in 2004. Net earnings in the first half of 2005 increased 13% to $141.9 million, or $0.14 per share, from $126.0 million, or $0.13 per share, in the first half of 2004.
?From an operational perspective, our business is proceeding well. PT Inco is on target to achieve its production goal for 2005 of 160 million pounds of nickel in matte. The impact of a planned nine-day furnace shutdown in April was partly offset by higher production in June. Equipment installed during the shutdown to reduce dust emissions is operating effectively and we are working with an external consultant to achieve sustainable business improvements in productivity, energy consumption and usage of other major commodities, while streamlining processes and lowering costs. During the quarter, good progress was made with mine operations at the Petea mine site. Also, our cloud seeding program is having positive effects, as second quarter rainfall filled our reservoir to more normal levels,? said Bing R. Tobing, President and Chief Executive Officer.
PT Inco?s balance sheet remains strong. Our cash balance at the end of second quarter of 2005 was $239.2 million compared with $240.3 million at the end of the same period last year.
?Our objective remains to raise our annual production capacity to 200 million pounds of nickel in matte by 2009. We are finalizing geotechnical studies to determine the best position on the Larona River at Karebbe for a new hydroelectric dam, which is the cornerstone of our plan. The capital estimate for this four-year production improvement program stands at $275-to-$280 million,? Mr. Tobing added.
The company?s realized price for nickel in matte averaged $12,591 per tonne ($5.55 per pound) in the second quarter of 2005, compared with $9,722 per tonne ($4.4l per pound) in the corresponding 2004 period and $11,344 per tonne ($5.15 per pound) in the first quarter of 2005. Under the Company?s long-term, must-take U.S. dollar-denominated sales contracts, the selling price of its nickel in matte is determined by a formula based on the higher of the London Metal Exchange cash price for nickel, and Inco Limited?s net average realized price for nickel.
Production of nickel in matte for the second quarter of 2005 was 18,700 tonnes (41.2 million pounds), compared with 18,700 tonnes (41.3 million pounds) in the corresponding 2004 period. Production of nickel in matte in the 2005 first half rose to 36,000 tonnes (79.3 million pounds) from 35,000 tonnes (77.3 million pounds) in the first six months of 2004.
Unit cash cost of production in the second quarter of 2005 rose 25% to $2.23 per pound from $1.78 per pound in the same period last year. The principal reason for this change is the increase in the price of high sulphur fuel oil, which climbed to an average of $35.86 per barrel in the second quarter of 2005 from $27.43 per barrel in the prior year period. With the nickel price remaining strong, PT Inco has supplemented its hydroelectric power generation with more expensive fuel-fired power generation, in order to maximize production. Prices continued to rise for other major? commodities needed for the Company?s operations such as sulphur, paste, coal and tires. Costs for mobile equipment operations, have also increased, as the width of the mining area expanded to 22 kilometers with the start of mining operations at Petea in early 2005. Productivity improvement efforts, and the cloud seeding program that began in the 2005 first quarter, accounted for an increase in unit cash costs of $0.13 per pound of nickel in matte in the 2005 second quarter.
In the first half of 2005, cash provided by operating activities, but before capital expenditures, decreased to $140.4 million from $214.9 million for the prior year period, primarily due to increased tax payments. Capital expenditures in the first six months of 2005 rose to $47.4 million from $25.4 million in the corresponding 2004 period. Dividend payments in the first half of 2005 rose to $97.2 million from $37.3 million in the first half of 2004. As a result of the increases in tax payments, capital expenditures and dividend payments, net cash outflow of $53.8 million was realized in the first half of 2005 compared with an inflow of $107.1 million for the corresponding period in 2004. (end of release)