All of you saavy dudes probably got this in the mail or by telepathy but for the record...
Inco Limited Reports a First Quarter Loss of $41 Million (U.S.)
Results Reflect After-Tax Restructuring Charge of $32 Million (U.S.)
TORONTO, April 21 /CNW/ - Inco Limited reported a loss of $41 million, or
29 cents a common share, for the first quarter of 1998, compared with a loss
of $4 million, or seven cents a share, in the fourth quarter of 1997 and net
earnings of $58 million, or 29 cents a share, in the first quarter of 1997.
The first quarter 1998 loss was primarily due to an after-tax charge of $32
million, or 19 cents a share, associated with the Company's restructuring
actions, and lower realized prices for nickel and copper. First quarter 1997
results included an after-tax gain of $36 million, or 22 cents a share,
resulting from the sale of the Company's 100 per cent interest in Doncasters
plc (''Doncasters'').
Commenting on the first quarter results, Mike Sopko, Chairman and Chief
Executive Officer, said that: ''While low nickel prices have continued to
adversely affect our results, we are encouraged by improved nickel unit
production costs compared with the corresponding prior year period. The
restructuring actions underway will significantly reduce Inco's cost structure
and strengthen our cash flow in the future. These actions are expected to
result in sustainable annual pre-tax savings of at least $165 million when the
full impact of these actions is realized in 1999.''
The Company's realized nickel price for primary nickel products
(including intermediates), the principal determinant of the Company's
profitability, averaged $6,173 per tonne ($2.80 per pound) in the first
quarter of 1998, compared with $6,724 per tonne ($3.05 per pound) in the
fourth quarter of 1997 and $7,716 per tonne ($3.50 per pound) in the first
quarter of 1997.
The Company's realized price for copper, reflecting the favourable impact
of its copper hedging activities, averaged $2,006 per tonne ($0.91 per pound)
in the first quarter of 1998, compared with $2,205 per tonne ($1.00 per pound)
in the fourth quarter of 1997 and $2,469 per tonne ($1.12 per pound) in the
first quarter of 1997.
Net sales from continuing operations were $500 million in the first
quarter of 1998, compared with $541 million in the fourth quarter of 1997 and
$614 million in the first quarter of 1997.
The Company's deliveries of primary metals are shown below:
<<
First Fourth First
Quarter Quarter Quarter
1998 1997 1997
----------------------------------
Nickel in all forms (tonnes) 64,267 64,570 65,110
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Copper (tonnes) 37,252 37,242 42,230
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Cobalt (tonnes) 515 721 508
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(in thousands)
Platinum-group metals (troy ounces) 62 74 39
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Gold (troy ounces) 15 11 11
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Silver (troy ounces) 410 475 370
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>>
The Company's finished nickel inventories were 30,277 tonnes at March 31,
1998, compared with 24,578 tonnes at December 31, 1997 and 30,621 tonnes at
March 31, 1997. The higher inventories at March 31, 1998 reflected the timing
of shipments and do not reflect any weakness in demand.
Operating results from continuing operations were a loss of $37 million
in the first quarter of 1998, compared with earnings of $33 million in the
fourth quarter of 1997 and $64 million in the first quarter of 1997. Operating
results comprise earnings or loss before income and mining taxes, interest
expense, general corporate income and expenses, and minority interest. Sales
and cost of sales include deliveries of purchased nickel.
The decrease in operating results for the first quarter of 1998, compared
with the first and fourth quarters of 1997, was primarily due to a pre-tax
charge of $64 million associated with restructuring actions announced in
February, comprising $50 million for severance costs relating to employment
reductions and a writedown of $14 million relating to assets which will be
affected by the restructuring actions. First quarter 1998 operating results,
compared with the first quarter of 1997, also reflected lower realized prices
for nickel and copper, partially offset by an eight per cent decrease in
nickel unit production costs and higher deliveries of precious metals.
Relative to the fourth quarter of 1997, first quarter 1998 operating results
also reflected lower nickel and copper price realizations and comparable
nickel unit production costs.
The restructuring charge represents the cost associated with the
announcement in February of further initiatives, as part of the Company's
comprehensive operational restructurings initially announced in November 1997,
to maximize profitability and cash flow in the current nickel market
environment. These actions collectively will include reduced capital and other
expenditures, reductions in employment levels and the phasing out of
production from higher-cost mines to focus on profitable production.
Cash used by the Company for operating activities during the first
quarter of 1998 was $34 million, reflecting the impact of lower realized
prices, compared with cash generated from operating activities of $14 million
in the first quarter of 1997. Capital expenditures were $106 million in the
first quarter of 1998, the same level as in the first quarter of 1997. Cash
flow from discontinued operations of $86 million in the first quarter of 1997
included net proceeds of $111 million from the sale of Doncasters.
At March 31, 1998, the Company's total debt increased $143 million to
$1,692 million, compared with $1,549 million at December 31, 1997, reflecting
principally the financing of the expansion of P.T. International Nickel
Indonesia and other capital expenditures. The Company's total debt:equity
ratio was 28:72 at March 31, 1998, compared with 26:74 at December 31, 1997.
At March 31, 1998, the Company had 166,059,082 Common Shares outstanding.
In March 1998, the Company announced the termination, by mutual agreement
with Haynes Holdings, Inc. (''Haynes''), of the pending sale of its Inco
Alloys International (''IAI'') business unit to Haynes. The Company continues
to evaluate the alternatives available to it to realize the significant value
represented by this business. The sale of this business is part of the
Company's strategy of disposing of its non-core businesses on a basis that
will maximize the value to be received by the Company. IAI's operating results
increased in the first quarter of 1998, compared with the fourth quarter of
1997, primarily due to higher deliveries, reflecting strong demand from
customers. The operating and financial results of IAI have been presented
separately as discontinued operations and comparative figures for the first
quarter of 1997 have been reclassified to conform with this presentation.
The Board of Directors today declared a quarterly dividend of
two-and-a-half cents (U.S.) a common share, payable June 1 to shareholders of
record on May 4. The Board of Directors also declared a dividend in respect of
the Company's 5.5% Convertible Redeemable Preferred Shares Series E, payable
June 1, for the quarter ending May 31, 1998, to shareholders of record on May
4. Consistent with the terms of the Class VBN Shares, which entitle the holder
to a minimum dividend equal to 80 per cent of the regular cash per share
common dividend, the Board of Directors also declared a dividend of two cents
(U.S.) per share in respect of the Company's Class VBN Shares, payable June 1
to shareholders of record on May 4.
Voisey's Bay Update
-------------------
Exploration
After the December 1997 holiday period, drilling resumed in early January
1998. Exploration and geophysical work has been concentrated in the immediate
area of the existing resources and reserves identified in the Ovoid, Southeast
Extension and Eastern Deeps sections and in the Reid Brook zone. A total of
13,356 metres of drilling was completed during the first quarter of 1998 with
five drills in operation. Drilling during the first quarter of 1998 has had
the two-fold objective of continuing the additional testing of near surface
resources and evaluating deep targets with the potential for significant new
discoveries.
Shallow definition drilling was carried out over the Southeast Extension
section to complete the resource picture in this area. This drilling also
demonstrated the geological continuity of the Southeast Extension with the
western end of the Eastern Deeps section. Understanding the relationship
between the Southeast Extension and the Ovoid will be important in identifying
similar mineralized settings in other geological environments. Evaluation of
recent drilling results is continuing. Given the complexity of this section,
an updated estimate of the potential indicated resources in the Southeast
Extension section has not yet been completed but is currently expected to be
completed by the end of June 1998.
Deep drilling resumed on the down plunge extension of the Reid Brook zone
and down dip geophysical targets within the troctolite dyke, the geological
formation containing mineralization found westward from the Ovoid. A hole on
the eastern extension of the Reid Brook zone intersected 74 metres of
mineralized dyke at a depth of 1300 metres. About 40 metres of the dyke
contained moderately to heavily disseminated sulphides. Assays have not yet
been received but grades are not expected to be as high as those identified in
the main body of the Reid Brook zone. This latest intersection in the Reid
Brook zone is, however, significant because it indicates that the dyke is
widening in this area. The style of sulphide mineralization identified is also
reminiscent of the west end of the Ovoid. Two wedge holes are planned to
provide additional intersections around the original hole in order to test for
a local enlargement of the mineralized dyke and for a transition to higher
grade mineralization. Other drill holes aimed at deep geophysical anomalies
below the Reid Brook zone are currently in progress.
Drilling has also been carried out on stratigraphic targets in the Red
Dog grid, about three kilometres southwest of the Ovoid, and on the western
continuation of the Reid Brook zone. At Red Dog, a hole was completed 150
metres to the southeast of a narrow massive sulphide zone drilled in 1996
(0.30 metres grading 5.4% nickel). The hole intersected up to 10% of coarse,
blotchy sulphides over a 30 metres interval of variable-textured troctolite.
Similar mineralization has been noted on the margins of the Eastern Deeps,
some 1.5 kilometres to the north. Follow-up drilling is in progress to assess
the potential for an analogous geological environment in this area.
Another stratigraphic hole tested a geophysical response 700 metres west
of the Reid Brook zone. About 26 metres of weakly mineralized troctolite was
intersected at a shallow depth below 113 metres of overburden. Borehole
geophysics indicated a strongly conductive source to the east and at depth, an
area where there has been limited previous drilling.
Late in March 1998, a 3,922 kilometre airborne electromagnetic and
magnetic geophysical survey was conducted over 75% of the claim areas held by
Voisey's Bay Nickel Company Limited (''VBNCL'') in Labrador. The survey
employed a new deep-penetrating airborne transient electromagnetic geophysical
system which is capable of detecting high grade nickel mineralization to
depths of 400 metres. Final processed results from this survey are expected in
time for verification and testing during the summer field season.
Status of Mine and Mill Facilities, Smelter and Refining Facilities
and Environmental Permitting
The period for submission of comments on the adequacy of the
Environmental Impact Statement (''EIS'') for the mine, mill and related
facilities and infrastructure in the Voisey's Bay, Labrador area (the
''Mine/Mill Project'') filed by VBNCL in mid-December 1997 ended on April 1,
1998. The five-person panel overseeing the environmental review and approval
process for the Mine/Mill Project had extended the deadline for comments by 30
days.
A number of submissions on the adequacy of the EIS were made and the
five-person panel is expected to identify by May 1, 1998 what, if any,
deficiencies exist with respect to the scope and content of the EIS. VBNCL
still expects that the environmental review process for the Mine/Mill Project
would be completed in the fourth quarter of 1998 and that the necessary
governmental approvals and permits would be obtained by sometime in the first
quarter of 1999, with construction to begin as soon as practical thereafter
given the prevailing climate conditions in the area.
A decision is expected in the next few weeks in the September 1997 action
filed by a Newfoundland-based organization, whose members include
environmental and other groups, in a Canadian federal court seeking to require
that the environmental review and approval process for the proposed smelter
and refinery facilities in Argentia be joined with the process governing the
Mine/Mill Project.
Status of Negotiations with Aboriginal Groups and Governments
Negotiations on separate Impact and Benefits Agreements (''IBA'') between
VBNCL and the Labrador Inuit Association (''LIA'') and Innu Nation continued
during the first quarter of 1998. The key issues previously identified in the
negotiations of IBAs remain to be resolved, with the nature and participation
by the aboriginal groups in the financial returns from the Voisey's Bay
deposit and shipping routes and shipping schedules still representing two of
the critical issues.
The Company has continued its review of the key financial, technical and
other issues facing Voisey's Bay, including the timing and scope of processing
facilities in the Province of Newfoundland and Labrador. The Company expects
to move forward with discussions with provincial representatives on the
project. The development of the Voisey's Bay project by the Company, including
the investment in processing facilities, will be dependent on sound economic
considerations and realizing an appropriate return for the Company's
shareholders relative to other projects, while at the same time meeting the
legitimate requirements of both governments and the aboriginal groups
concerned.
This news release contains forward-looking statements regarding the
Voisey's Bay project and the Company's other businesses and operations. Actual
results may differ materially from those contemplated by these statements
depending on, among others, such key factors as the timing of receipt of
necessary federal and provincial environmental and other approvals, settlement
of aboriginal land claims, exploration activities and results, engineering and
construction timetables, financing arrangements, supply and demand for metals
to be produced, production levels, metals prices and the timing of, and use of
proceeds from, the sale of the alloys business.
+ + + + +
Unaudited Condensed Consolidated Financial Statements Are Attached.
IN 06/98
April 21, 1998
Note: All dollar amounts are expressed in United States currency.
<<
INCO LIMITED
--------------------------
(U.S. dollars in millions)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
----------------------------------------------
Fourth
First Quarter Quarter
1998 1997 1997
---------------------------------------
Net sales $ 500 $ 614 $ 541
---------------------------------------
Costs and expenses
Cost of sales and operating 525 519 487
Selling, general and administrative 28 30 29
Research and development 5 6 10
Exploration 8 7 6
Interest 22 21 19
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Total costs and expenses 588 583 551
---------------------------------------
Earnings (loss) before taxes and
minority interest (88) 31 (10)
Income and mining taxes (42) 14 (5)
---------------------------------------
Earnings (loss) before minority
interest (46) 17 (5)
Minority interest 1 4 2
---------------------------------------
Earnings (loss) from continuing
operations (47) 13 (7)
Earnings from discontinued
operations 6 45 3
---------------------------------------
Net earnings (loss) (41) 58 (4)
Dividends on preferred shares (6) (7) (7)
Dividends on class VBN shares (1) (2) (2)
---------------------------------------
Net earnings (loss) applicable
to common shares $ (48) $ 49 $ (13)
---------------------------------------
---------------------------------------
Net earnings (loss) per common share
Basic and fully diluted
Continuing operations $ (0.32) $ 0.01 $ (0.09)
Discontinued operations 0.03 0.28 0.02
---------------------------------------
$ (0.29) $ 0.29 $ (0.07)
---------------------------------------
---------------------------------------
Common shares outstanding
(weighted average, in thousands) 166,038 166,725 166,185
---------------------------------------
---------------------------------------
INCO LIMITED
--------------------------
(U.S. dollars in millions)
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
------------------------------------
March 31, December 31,
1998 1997
---------------------------
Assets
Cash and marketable securities $ 39 $ 56
Accounts receivable 391 391
Inventories 799 796
Prepaid expenses 38 21
Deferred taxes 39 32
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Total current assets 1,306 1,296
Capital assets 6,279 6,252
Other assets 241 224
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$7,826 $7,772
----------- -----------
----------- -----------
Liabilities and shareholders' equity
Notes payable $ 47 $ 9
Long-term debt due within one year 45 45
Accounts payable and accrued liabilities 533 524
Taxes payable 45 28
----------- -----------
Total current liabilities 670 606
Long-term debt 1,600 1,495
Deferred taxes 203 278
Post-retirement benefits 620 614
Future removal and site restoration costs 33 30
Minority interest 279 278
Shareholders' equity 4,421 4,471
----------- -----------
$7,826 $7,772
----------- -----------
----------- -----------
INCO LIMITED
--------------------------
(U.S. dollars in millions)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
----------------------------------------------
First Quarter
1998 1997
---------- ----------
Operating activities
Earnings (loss) before minority interest $ (46) $ 17
Charges (credits) not affecting cash
Depreciation and depletion 64 57
Deferred income and mining taxes (68) 2
Other, net 7 (4)
Decrease (increase) in non-cash working
capital related to operations 12 (56)
Accruals less than payments
for post-retirement benefits (3) (2)
--------------------
(34) 14
--------------------
Investing activities
Capital expenditures (106) (106)
Other, net (3) (7)
--------------------
(109) (113)
--------------------
Financing activities
Net increase in borrowings 143 14
Common shares issued 1 15
Preferred, class VBN and common
dividends paid (11) (26)
Dividends paid to minority interest (1) (1)
--------------------
132 2
--------------------
Discontinued operations (6) 86
--------------------
Decrease in cash and marketable securities (17) (11)
Cash and marketable securities at
beginning of period 56 78
--------------------
Cash and marketable securities
at end of period $ 39 $ 67
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