Record quarterly copper production and transformation to pure-play energy transition metals company
Teck Resources Limited (TSX: TECK.A and TECK.B) (NYSE: TECK) announced its unaudited second quarter results for 2024.
“We generated $1.7 billion of Adjusted EBITDA1 in the second quarter driven by record copper production with QB ramp-up continuing, as well as strong copper market fundamentals with copper prices reaching all-time highs,” said Jonathan Price, President and CEO. “In early July, we completed the sale of our steelmaking coal business, and we now move forward as a pure-play energy transition metals company with leading copper growth. With cash proceeds of US$7.3 billion we will reduce debt, retain cash to fund our near-term copper growth, and return significant cash to our shareholders.”
Highlights
Note:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
Financial Summary Q2 2024
Financial Metrics1 (CAD$ in millions, except per share data) |
Q2 2024 | Q2 2023 | ||
Revenue | $ | 3,873 | $ | 3,519 |
Gross profit | $ | 1,162 | $ | 1,410 |
Gross profit before depreciation and amortization2 | $ | 1,828 | $ | 1,841 |
Profit from continuing operations before taxes | $ | 658 | $ | 805 |
Adjusted EBITDA2 | $ | 1,670 | $ | 1,479 |
Profit from continuing operations attributable to shareholders | $ | 363 | $ | 510 |
Adjusted profit from continuing operations attributable to shareholders2 | $ | 413 | $ | 643 |
Basic earnings per share from continuing operations | $ | 0.70 | $ | 0.98 |
Diluted earnings per share from continuing operations | $ | 0.69 | $ | 0.97 |
Adjusted basic earnings per share from continuing operations2 | $ | 0.80 | $ | 1.24 |
Adjusted diluted earnings per share from continuing operations2 | $ | 0.79 | $ | 1.22 |
Notes:
Key Updates
Executing on Our Copper Growth Strategy
Sale of the Steelmaking Coal Business
Safety and Sustainability Leadership
Guidance
2024 Guidance – Summary | Current |
Production Guidance | |
Copper (000’s tonnes) | 435 – 500 |
Zinc (000’s tonnes) | 565 – 630 |
Refined zinc (000’s tonnes) | 275 – 290 |
Sales Guidance – Q3 2024 | |
Red Dog zinc in concentrate sales (000’s tonnes) | 250 – 290 |
Unit Cost Guidance | |
Copper net cash unit costs (US$/lb.)1 | 1.90 – 2.30 |
Zinc net cash unit costs (US$/lb.)1 | 0.55 – 0.65 |
Note:
Click here to view Teck’s full second quarter results for 2024.
USE OF NON-GAAP FINANCIAL MEASURES AND RATIOS
Our annual financial statements are prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IASB). Our interim financial results are prepared in accordance with IAS 34, Interim Financial Reporting (IAS 34). This document refers to a number of non-GAAP financial measures and non-GAAP ratios, which are not measures recognized under IFRS Accounting Standards and do not have a standardized meaning prescribed by IFRS Accounting Standards 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 Accounting Standards, 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 as a substitute for other measures of performance prepared in accordance with IFRS Accounting Standards.
Adjusted profit from continuing operations attributable to shareholders – For adjusted profit from continuing operations attributable to shareholders, we adjust profit from continuing operations 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 from continuing operations attributable to shareholders as described above.
Adjusted profit from continuing operations 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.
Adjusted basic earnings per share from continuing operations – Adjusted basic earnings per share from continuing operations is adjusted profit from continuing operations attributable to shareholders divided by average number of shares outstanding in the period.
Adjusted diluted earnings per share from continuing operations – Adjusted diluted earnings per share from continuing operations is adjusted profit from continuing operations attributable to shareholders divided by average number of fully diluted shares in a period.
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.
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.
Profit from Continuing Operations Attributable to Shareholders and Adjusted Profit from Continuing Operations Attributable to Shareholders
Three months ended June 30, | Six months ended June 30, | |||||||||||
(CAD$ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||
Profit from continuing operations attributable to shareholders1 | $ | 363 | $ | 510 | $ | 706 | $ | 1,676 | ||||
Add (deduct) on an after-tax basis: | ||||||||||||
QB variable consideration to IMSA and ENAMI | 32 | 69 | 42 | 71 | ||||||||
Environmental costs | 5 | 3 | (12 | ) | 16 | |||||||
Inventory write-downs | — | — | 19 | — | ||||||||
Share-based compensation | 22 | 42 | 49 | 60 | ||||||||
Commodity derivatives | (29 | ) | 23 | (27 | ) | 19 | ||||||
Loss (gain) on disposal or contribution of assets | 9 | — | 3 | (186 | ) | |||||||
Elkview business interruption claim | — | (81 | ) | — | (149 | ) | ||||||
Other | 11 | 77 | 25 | 66 | ||||||||
Adjusted profit from continuing operations attributable to shareholders1 | $ | 413 | $ | 643 | $ | 805 | $ | 1,573 | ||||
Basic earnings per share from continuing operations | $ | 0.70 | $ | 0.98 | $ | 1.36 | $ | 3.25 | ||||
Diluted earnings per share from continuing operations | $ | 0.69 | $ | 0.97 | $ | 1.35 | $ | 3.20 | ||||
Adjusted basic earnings per share from continuing operations | $ | 0.80 | $ | 1.24 | $ | 1.55 | $ | 3.05 | ||||
Adjusted diluted earnings per share from continuing operations | $ | 0.79 | $ | 1.22 | $ | 1.54 | $ | 3.00 |
Note:
Reconciliation of Basic Earnings per share from Continuing Operations to Adjusted Basic Earnings per share from Continuing Operations
Three months ended June 30, | Six months ended June 30, | |||||||||||
(Per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||||
Basic earnings per share from continuing operations | $ | 0.70 | $ | 0.98 | $ | 1.36 | $ | 3.25 | ||||
Add (deduct): | ||||||||||||
QB variable consideration to IMSA and ENAMI | 0.06 | 0.14 | 0.08 | 0.14 | ||||||||
Environmental costs | 0.01 | — | (0.02 | ) | 0.03 | |||||||
Inventory write-downs | — | — | 0.04 | — | ||||||||
Share-based compensation | 0.04 | 0.08 | 0.09 | 0.11 | ||||||||
Commodity derivatives | (0.05 | ) | 0.05 | (0.05 | ) | 0.04 | ||||||
Loss (gain) on disposal or contribution of assets | 0.02 | — | 0.01 | (0.36 | ) | |||||||
Elkview business interruption claim | — | (0.16 | ) | — | (0.29 | ) | ||||||
Other | 0.02 | 0.15 | 0.04 | 0.13 | ||||||||
Adjusted basic earnings per share from continuing operations | $ | 0.80 | $ | 1.24 | $ | 1.55 | $ | 3.05 | ||||
Reconciliation of Diluted Earnings per share from Continuing Operations to Adjusted Diluted Earnings per share from Continuing Operations
Three months ended June 30, | Six months ended June 30, | |||||||||||
(Per share amounts) | 2024 | 2023 | 2024 | 2023 | ||||||||
Diluted earnings per share from continuing operations | $ | 0.69 | $ | 0.97 | $ | 1.35 | $ | 3.20 | ||||
Add (deduct): | ||||||||||||
QB variable consideration to IMSA and ENAMI | 0.06 | 0.13 | 0.08 | 0.13 | ||||||||
Environmental costs | 0.01 | 0.01 | (0.02 | ) | 0.03 | |||||||
Inventory write-downs | — | — | 0.04 | — | ||||||||
Share-based compensation | 0.04 | 0.08 | 0.09 | 0.11 | ||||||||
Commodity derivatives | (0.05 | ) | 0.04 | (0.05 | ) | 0.04 | ||||||
Loss (gain) on disposal or contribution of assets | 0.02 | — | 0.01 | (0.35 | ) | |||||||
Elkview business interruption claim | — | (0.15 | ) | — | (0.28 | ) | ||||||
Other | 0.02 | 0.14 | 0.04 | 0.12 | ||||||||
Adjusted diluted earnings per share from continuing operations | $ | 0.79 | $ | 1.22 | $ | 1.54 | $ | 3.00 | ||||
Reconciliation of EBITDA and Adjusted EBITDA
Three months ended June 30, | Six months ended June 30, | |||||||||||
(CAD$ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||
Profit from continuing operations before taxes | $ | 658 | $ | 805 | $ | 1,399 | $ | 2,661 | ||||
Finance expense net of finance income | 253 | 39 | 484 | 69 | ||||||||
Depreciation and amortization | 666 | 431 | 1,296 | 854 | ||||||||
EBITDA1 | 1,577 | 1,275 | 3,179 | 3,584 | ||||||||
Add (deduct): | ||||||||||||
QB variable consideration to IMSA and ENAMI | 49 | 114 | 69 | 116 | ||||||||
Environmental costs | 6 | 4 | (23 | ) | 21 | |||||||
Inventory write-downs | — | — | 41 | — | ||||||||
Share-based compensation | 28 | 56 | 63 | 78 | ||||||||
Commodity derivatives | (39 | ) | 30 | (37 | ) | 24 | ||||||
Loss (gain) on disposal or contribution of assets | 14 | 1 | 6 | (257 | ) | |||||||
Elkview business interruption claim | — | (117 | ) | — | (219 | ) | ||||||
Other | 35 | 116 | 65 | 104 | ||||||||
Adjusted EBITDA1 | $ | 1,670 | $ | 1,479 | $ | 3,363 | $ | 3,451 |
Note:
Reconciliation of Gross Profit Before Depreciation and Amortization
Three months ended June 30, | Six months ended June 30, | |||||||||||
(CAD$ in millions) | 2024 | 2023 | 2024 | 2023 | ||||||||
Gross profit | $ | 1,162 | $ | 1,410 | $ | 2,451 | $ | 3,076 | ||||
Depreciation and amortization | 666 | 431 | 1,296 | 854 | ||||||||
Gross profit before depreciation and amortization | $ | 1,828 | $ | 1,841 | $ | 3,747 | $ | 3,930 | ||||
Reported as: | ||||||||||||
Copper | ||||||||||||
Quebrada Blanca | $ | 218 | $ | — | $ | 284 | $ | (1 | ) | |||
Highland Valley Copper | 170 | 97 | 282 | 233 | ||||||||
Antamina | 279 | 226 | 476 | 456 | ||||||||
Carmen de Andacollo | 25 | (3 | ) | 21 | 9 | |||||||
Other | 2 | (2 | ) | 2 | (6 | ) | ||||||
694 | 318 | 1,065 | 691 | |||||||||
Zinc | ||||||||||||
Trail Operations | (54 | ) | 33 | (29 | ) | 69 | ||||||
Red Dog | 107 | 123 | 215 | 250 | ||||||||
Other | 14 | (12 | ) | 7 | (2 | ) | ||||||
67 | 144 | 193 | 317 | |||||||||
Steelmaking coal | 1,067 | 1,379 | 2,489 | 2,922 | ||||||||
Gross profit before depreciation and amortization | $ | 1,828 | $ | 1,841 | $ | 3,747 | $ | 3,930 |
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