Phelps Dodge shares plunge as profit outlook's slashed –
[Blames “price guarantee hedging” – really. This sounds like Butler and I do not buy it. Mish]
Tuesday, January 10, 2006 4:18:50 PM
afxpress.com
Phelps Dodge shares plunge as profit outlook's slashed - UPDATE 1 WASHINGTON (AFX) -- Shares of Phelps Dodge Corp. plunged as much as 11% Tuesday as the copper mining giant slashed its profit outlook for the fourth quarter
The Phoenix-based company cited one-time charges as reducing its fourth-quarter earnings to $1 to $1.30 a share, down from a previous estimate of $4.15 to $4.40 a share. Quarterly charges would jump to $2.05 a share from 23 cents, reflecting what the company called "higher copper prices for the period, associated adverse accounting effects of the company's 2005-2007 copper price-protection programs, and production and sales shortfalls of copper and molybdenum." Analysts, on average, had been looking for quarterly earnings of $4.76 a share, according to estimates compiled by Thomson First Call
Copper prices in the December quarter averaged about $2 a pound, more than 11% higher than the $1.80-a-pound average that Phelps Dodge had previously anticipated
However, this would be more than offset by the price-protection program, which the company will cut operating earnings by $200 million
In addition, Phelps Dodge pointed to several special items that had not been determined at the time of management's previous forecast, including taxes on cash primarily repatriated from the company's South American mining operations and charges associated with the announced deals in which it plans to sell its specialty-chemicals unit and its North American magnet-wire assets. Phelps Dodge also said its total cash balance at the end of 2005 stood at about $1.9 billion, or $400 million less than management had forecast at the end of October
The company said it contributed $200 million to recently established trusts for post-retirement medical and life-insurance benefit obligations as well as $100 million to a recently established trust for environmental reclamation and remediation obligations
On heavy volume, shares of Phelps Dodge traded down as low as $138 in early dealings and stood lately at $144.85, down 9.70, or 6.2%. Reflecting record price gains for copper, the stock more than doubled from its 52-week low of $78.20 set last May, setting a 52-week high of $156.90 on Monday
Phelps Dodge issued its update on the heels of another industrial-metals bellwether reporting disppointing fourth-quarter results late Monday. Alcoa Inc. saw its shares retreat in the wake of results showing higher sales but a lower profit |
