Release: PT.Inco more than doubles earnings in 2004 and sets production record
Wednesday, February 16 2005 - 09:01 AM WIB
Net earnings in the fourth quarter of 2004 were $56.2 million ($0.06 per share), a 43% increase from $39.2 million ($0.04 per share) in the same period last year. Sales were up 17% at $190.2 million compared to $162.3 million in the 2003 fourth quarter.
?Production of 159 million pounds of nickel in matte in 2004 was the highest in our history and we are targeting an equally strong 160 million pounds in 2005,? said Bing R. Tobing, President and Chief Executive Officer. ?We achieved record production even though limited rainfall in the fourth quarter curtailed water inflows to our hydroelectric power reservoirs. Accordingly, in December we operated three of four furnaces, and took the opportunity to repair the Larona power feed channel and overhaul electrodes on two furnaces.
?Since our production is limited by hydropower availability we will build a new dam at Karebbe on the Larona River, at a capital cost of about $150, to raise generating capacity by 33%, or 90 megawatts annually. As well as helping us move toward our goal of increasing production to 200 million pounds of nickel in matte by 2009, the new dam will reduce energy supply risk in years of low rainfall like 2004. Our overall objectives include maximizing production while minimizing costs, to take advantage of the robust nickel prices that we expect during 2005 and beyond. Our plans for growth are supported by the new two-year collective labour agreement that we signed on December 15, 2004,? Mr. Tobing said.
?PT Inco has the financial strength and flexibility to allow the Company to expand in a prudent manner. We repaid $77 million in 2004 and our outstanding long-term debt balance, including the portion due within one year, now stands at $115.4 million,? added Mr. Tobing.
The Company?s realized price for nickel in matte averaged $10,858 per tonne ($4.93 per pound) in the fourth quarter of 2004, a 26% increase from $8,618 per tonne ($3.91 per pound) in the same period last year. In 2004 the Company?s realized price for nickel in matte averaged $10,766 per tonne ($4.88 per pound), up substantially from $7,117 per tonne ($3.23 per pound) in 2003. Under the Company?s long-term U.S. dollar-denominated sales contracts, the selling price of its nickel in matte production is determined by a formula based on the London Metal Exchange cash price for nickel.
As a result of lower fourth quarter rainfall ? and therefore less hydroelectric power availability?nickel in matte production decreased slightly to 17,100 tonnes (37.5 million pounds) from 17,300 tonnes (38.1 million pounds) in the corresponding 2003 period. However, production for the 2004 year climbed to 72,200 tonnes (159.1 million pounds) from 70,500 tonnes (154.8 million pounds) in 2003.
Unit cash cost of production in the fourth quarter of 2004 rose 19% to $2.09 per pound from $1.76 per pound in the same quarter last year. This was mainly due to increases in the price of high sulphur fuel oil (HSFO) ? which averaged $30.35 per barrel in the fourth quarter of 2004 compared to $26.72 per barrel in the same quarter of 2003 ? as well as to greater usage of mining related services and contracts. In order to raise production in a strong market, the Company continues to augment its hydropower generation with more expensive fuel-fired power.
Cash provided by operating activities, but before capital expenditures, was $397.4 million in 2004, including $79.6 million generated in the fourth quarter, compared with $251.5 million in 2003. The improvement was mainly due to a $304.7 million increase in cash receipts from customers, partially offset by $88.7 million in tax instalments, $59.2 million in payments to suppliers and a $1.8 million rise in employment costs from the 2003 level.
Capital expenditures in 2004 rose to $115.5 million from $45.1 million in 2003. Capital expenditures included the development of the Petea orebody, which we began mining in October; replacing and enlarging the mine mobile equipment fleet; a DC-Link, which provides access to more energy by linking our two power systems; and equipment to reduce furnace gas emissions. Net cash inflow after capital expenditures, debt servicing and dividend payments was $159.8 million in 2004, compared to $110.8 million in 2003. (end of release)