
Teck Resources Limited (TSX: TECK.A and TECK.B) (NYSE: TECK) announced its unaudited second quarter results for 2022.
“This marks Teck’s fourth consecutive quarter of record-setting EBITDA and profitability, driven by strong commodity prices in the quarter, which enabled us to complete $572 million in share buybacks and pay down a further US$650 million in outstanding debt,” said Don Lindsay, President and CEO. “Our solid operational performance, strong balance sheet and $8.4 billion in liquidity all put Teck on a very strong footing as we manage through inflationary pressures and a slowdown in the global economy.”
Highlights
Note:
Financial Summary Q2 2022
Financial Metrics
(CAD$ in millions, except per share data) |
Q2 2022 | Q2 2021 | ||
Revenue | $ | 5,787 | $ | 2,558 |
Gross profit | $ | 3,288 | $ | 689 |
Gross profit before depreciation and amortization1 | $ | 3,740 | $ | 1,059 |
Profit before taxes | $ | 2,663 | $ | 469 |
Adjusted EBITDA1 | $ | 3,290 | $ | 989 |
Profit attributable to shareholders | $ | 1,675 | $ | 260 |
Adjusted profit attributable to shareholders1 | $ | 1,772 | $ | 339 |
Basic earnings per share | $ | 3.12 | $ | 0.49 |
Diluted earnings per share | $ | 3.07 | $ | 0.48 |
Adjusted basic earnings per share1 | $ | 3.30 | $ | 0.64 |
Adjusted diluted earnings per share1 | $ | 3.25 | $ | 0.63 |
Note:
Key Updates
Executing on our copper growth strategy – QB2 a long-life, low-cost operation with major expansion potential
Safety and sustainability leadership
Guidance
2022 Guidance – Summary | Previous | Change | Current |
Production Guidance | |||
Copper (000’s tonnes) | 273 – 290 | — | 273 – 290 |
Zinc (000’s tonnes) | 630 – 665 | — | 630 – 665 |
Refined zinc (000’s tonnes) | 270 – 285 | — | 270 – 285 |
Steelmaking coal (million tonnes) | 24.5 – 25.5 | (1.0) – (1.5) | 23.5 – 24.0 |
Bitumen (million barrels) | 12.0 – 14.4 | — | 12.0 – 14.4 |
Sales Guidance – Q3 2022 | |||
Red Dog zinc in concentrate sales (000’s tonnes) | 215 – 240 | ||
Steelmaking coal sales (million tonnes) | 5.8 – 6.2 | ||
Unit Cost Guidance | |||
Copper net cash unit costs (US$/lb.)1 | 1.40 – 1.50 | 0.08 – 0.08 | 1.48 – 1.58 |
Zinc net cash unit costs (US$/lb.)1 | 0.32 – 0.38 | 0.05 – 0.05 | 0.37 – 0.43 |
Steelmaking coal adjusted site cash cost of sales (CAD$/tonne)1 | 79 – 83 | 8 – 9 | 87 – 92 |
Steelmaking coal transportation costs (CAD$/tonne) | 43 – 46 | — | 43 – 46 |
Bitumen adjusted operating costs (CAD$/barrel)1 | 28 – 32 | 5 – 4 | 33 – 36 |
Note:
Click here to view Teck’s full second quarter results for 2022.
USE OF NON-GAAP FINANCIAL MEASURES AND RATIOS
Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This document refers to a number of non-GAAP financial measures and non-GAAP ratios which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS or by Generally Accepted Accounting Principles (GAAP) in the United States.
The non-GAAP financial measures and non-GAAP ratios described below do not have standardized meanings under IFRS, may differ from those used by other issuers, and may not be comparable to similar financial measures and ratios reported by other issuers. These financial measures and ratios have been derived from our financial statements and applied on a consistent basis as appropriate. We disclose these financial measures and ratios because we believe they assist readers in understanding the results of our operations and financial position and provide further information about our financial results to investors. These measures should not be considered in isolation or used in substitute for other measures of performance prepared in accordance with IFRS.
Adjusted profit attributable to shareholders – For adjusted profit attributable to shareholders, we adjust profit attributable to shareholders as reported to remove the after-tax effect of certain types of transactions that reflect measurement changes on our balance sheet or are not indicative of our normal operating activities.
EBITDA – EBITDA is profit before net finance expense, provision for income taxes, and depreciation and amortization.
Adjusted EBITDA – Adjusted EBITDA is EBITDA before the pre-tax effect of the adjustments that we make to adjusted profit attributable to shareholders as described above.
Adjusted profit attributable to shareholders, EBITDA, and Adjusted EBITDA highlight items and allow us and readers to analyze the rest of our results more clearly. We believe that disclosing these measures assists readers in understanding the ongoing cash generating potential of our business in order to provide liquidity to fund working capital needs, service outstanding debt, fund future capital expenditures and investment opportunities, and pay dividends.
Gross profit before depreciation and amortization – Gross profit before depreciation and amortization is gross profit with depreciation and amortization expense added back. We believe this measure assists us and readers to assess our ability to generate cash flow from our business units or operations.
Adjusted site cash cost of sales – Adjusted site cash cost of sales for our steelmaking coal operations is defined as the cost of the product as it leaves the mine excluding depreciation and amortization charges, out-bound transportation costs and any one-time collective agreement charges and inventory write-down provisions.
Total cash unit costs – Total cash unit costs for our copper and zinc operations includes adjusted cash costs of sales, as described below, plus the smelter and refining charges added back in determining adjusted revenue. This presentation allows a comparison of total cash unit costs, including smelter charges, to the underlying price of copper or zinc in order to assess the margin for the mine on a per unit basis.
Net cash unit costs – Net cash unit costs of principal product, after deducting co-product and by-product margins, are also a common industry measure. By deducting the co- and by-product margin per unit of the principal product, the margin for the mine on a per unit basis may be presented in a single metric for comparison to other operations.
Adjusted cash cost of sales – Adjusted cash cost of sales for our copper and zinc operations is defined as the cost of the product delivered to the port of shipment, excluding depreciation and amortization charges, any one-time collective agreement charges or inventory write-down provisions and by-product cost of sales. It is common practice in the industry to exclude depreciation and amortization as these costs are non-cash and discounted cash flow valuation models used in the industry substitute expectations of future capital spending for these amounts.
Adjusted operating costs – Adjusted operating costs for our energy business unit is defined as the costs of product as it leaves the mine, excluding depreciation and amortization charges, cost of diluent for blending to transport our bitumen by pipeline, cost of non-proprietary product purchased and transportation costs of our product and non-proprietary product and any one-time collective agreement charges or inventory write-down provisions.
Adjusted basic earnings per share – Adjusted basic earnings per share is adjusted profit attributable to shareholders divided by average number of shares outstanding in the period.
Adjusted diluted earnings per share – Adjusted diluted earnings per share is adjusted profit attributable to shareholders divided by average number of fully diluted shares in a period.
Profit Attributable to Shareholders and Adjusted Profit Attributable to Shareholders
Three months ended June 30, | Six months ended June 30, | |||||||||||
(CAD$ in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||
Profit attributable to shareholders | $ | 1,675 | $ | 260 | $ | 3,246 | $ | 565 | ||||
Add (deduct) on an after-tax basis: | ||||||||||||
Loss on debt purchase | 46 | — | 46 | — | ||||||||
QB2 variable consideration to IMSA and ENAMI | 37 | 13 | 96 | 43 | ||||||||
Environmental costs | (51 | ) | 44 | (111 | ) | 11 | ||||||
Inventory write-downs (reversals) | 23 | — | 23 | (6 | ) | |||||||
Share-based compensation | 6 | 24 | 88 | 34 | ||||||||
Commodity derivatives | 34 | (20 | ) | (3 | ) | (5 | ) | |||||
Other | 2 | 18 | 7 | 23 | ||||||||
Adjusted profit attributable to shareholders | $ | 1,772 | $ | 339 | $ | 3,392 | $ | 665 | ||||
Basic earnings per share | $ | 3.12 | $ | 0.49 | $ | 6.05 | $ | 1.06 | ||||
Diluted earnings per share | $ | 3.07 | $ | 0.48 | $ | 5.94 | $ | 1.05 | ||||
Adjusted basic earnings per share | $ | 3.30 | $ | 0.64 | $ | 6.33 | $ | 1.25 | ||||
Adjusted diluted earnings per share | $ | 3.25 | $ | 0.63 | $ | 6.21 | $ | 1.23 | ||||
Reconciliation of Basic Earnings per share to Adjusted Basic Earnings per share
Three months ended June 30, | Six months ended June 30, | |||||||||||
(Per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||
Basic earnings per share | $ | 3.12 | $ | 0.49 | $ | 6.05 | $ | 1.06 | ||||
Add (deduct): | ||||||||||||
Loss on debt purchase | 0.09 | — | 0.09 | — | ||||||||
QB2 variable consideration to IMSA and ENAMI | 0.07 | 0.02 | 0.18 | 0.08 | ||||||||
Environmental costs | (0.10 | ) | 0.08 | (0.21 | ) | 0.02 | ||||||
Inventory write-downs (reversals) | 0.04 | — | 0.04 | (0.01 | ) | |||||||
Share-based compensation | 0.01 | 0.05 | 0.16 | 0.06 | ||||||||
Commodity derivatives | 0.06 | (0.04 | ) | (0.01 | ) | (0.01 | ) | |||||
Other | 0.01 | 0.04 | 0.03 | 0.05 | ||||||||
Adjusted basic earnings per share | $ | 3.30 | $ | 0.64 | $ | 6.33 | $ | 1.25 | ||||
Reconciliation of Diluted Earnings per share to Adjusted Diluted Earnings per share
Three months ended June 30, | Six months ended June 30, | |||||||||||
(Per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||
Diluted earnings per share | $ | 3.07 | $ | 0.48 | $ | 5.94 | $ | 1.05 | ||||
Add (deduct): | ||||||||||||
Loss on debt purchase | 0.08 | — | 0.08 | — | ||||||||
QB2 variable consideration to IMSA and ENAMI | 0.07 | 0.03 | 0.18 | 0.08 | ||||||||
Environmental costs | (0.09 | ) | 0.08 | (0.20 | ) | 0.02 | ||||||
Inventory write-downs (reversals) | 0.04 | — | 0.04 | (0.01 | ) | |||||||
Share-based compensation | 0.01 | 0.04 | 0.16 | 0.06 | ||||||||
Commodity derivatives | 0.06 | (0.04 | ) | (0.01 | ) | (0.01 | ) | |||||
Other | 0.01 | 0.04 | 0.02 | 0.04 | ||||||||
Adjusted diluted earnings per share | $ | 3.25 | $ | 0.63 | $ | 6.21 | $ | 1.23 | ||||
Reconciliation of EBITDA and Adjusted EBITDA
Three months ended June 30, | Six months ended June 30, | |||||||||||
(CAD$ in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||
Profit before taxes | $ | 2,663 | $ | 469 | $ | 5,113 | $ | 970 | ||||
Finance expense net of finance income | 46 | 51 | 95 | 102 | ||||||||
Depreciation and amortization | 452 | 370 | 901 | 748 | ||||||||
EBITDA | 3,161 | 890 | 6,109 | 1,820 | ||||||||
Add (deduct): | ||||||||||||
Loss on debt purchase | 63 | — | 63 | — | ||||||||
QB2 variable consideration to IMSA and ENAMI | 62 | 21 | 161 | 71 | ||||||||
Environmental costs | (71 | ) | 61 | (153 | ) | 15 | ||||||
Inventory write-downs (reversals) | 32 | — | 32 | (10 | ) | |||||||
Share-based compensation | 5 | 33 | 115 | 47 | ||||||||
Commodity derivatives | 45 | (27 | ) | (4 | ) | (7 | ) | |||||
Other | (7 | ) | 11 | 11 | 20 | |||||||
Adjusted EBITDA | $ | 3,290 | $ | 989 | $ | 6,334 | $ | 1,956 | ||||
Reconciliation of Gross Profit Before Depreciation and Amortization
Three months ended June 30, | Six months ended June 30, | |||||||||||
(CAD$ in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||
Gross profit | $ | 3,288 | $ | 689 | $ | 5,856 | $ | 1,343 | ||||
Depreciation and amortization | 452 | 370 | 901 | 748 | ||||||||
Gross profit before depreciation and amortization | $ | 3,740 | $ | 1,059 | $ | 6,757 | $ | 2,091 | ||||
Reported as: | ||||||||||||
Copper | ||||||||||||
Highland Valley Copper | $ | 217 | $ | 194 | $ | 463 | $ | 396 | ||||
Antamina | 298 | 254 | 556 | 456 | ||||||||
Carmen de Andacollo | 37 | 59 | 76 | 106 | ||||||||
Quebrada Blanca | 7 | 11 | 20 | 22 | ||||||||
Other | — | — | — | — | ||||||||
559 | 518 | 1,115 | 980 | |||||||||
Zinc | ||||||||||||
Trail Operations | 12 | (3 | ) | 46 | 40 | |||||||
Red Dog | 183 | 91 | 457 | 216 | ||||||||
Other | (1 | ) | 8 | (4 | ) | 11 | ||||||
194 | 96 | 499 | 267 | |||||||||
Steelmaking coal | 2,806 | 457 | 4,838 | 869 | ||||||||
Energy | 181 | (12 | ) | 305 | (25 | ) | ||||||
Gross profit before depreciation and amortization | $ | 3,740 | $ | 1,059 | $ | 6,757 | $ | 2,091 | ||||
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