teck resources

MAPLE LEAF FOODS INC., $15.98, Toronto symbol MFI, rose 20% this week after the company announced that it plans to sell all of part of its 90.0% stake in Canada Bread (see below). Canada Bread is Canada’s second-largest producer of fresh and frozen baked goods, after Weston Bakery. It also makes pastas and sauces. Canada Bread supplies around a third of Maple Leaf’s sales. Maple Leaf’s stake in this business—currently worth $1.6 billion—is equal to 73% of Maple Leaf’s $2.2-billion market cap. The company would use the proceeds to fund a major restructuring of its meat-processing operations. This includes building new plants and eliminating unprofitable products. It’s also installing a new computer system that will give its managers more timely information. In addition, the cash would help Maple Leaf pay down its long-term debt of $1.3 billion....

In choosing a Stock of the Year, we aim for a “heads you win, tails you break even” situation. These stocks can put on above-average rises, but they’re unlikely to be disasters if they disappoint.

Our past #1 picks, including Agrium (see page 101), sometimes take a year or more to get going....

TECK RESOURCES LTD., $25.11, Toronto symbol TCK.B, reported lower results this week due to weaker metallurgical coal and copper prices. Even so, the latest revenue and earnings beat the consensus forecasts. In the three months ended June 30, 2013, Teck’s earnings fell 50.5%, to $197 million, or $0.34 a share. These figures exclude unusual items, such as foreign exchange losses and asset writedowns. On this basis, the latest earnings beat the consensus estimate of $0.31 a share. A year earlier, Teck earned $398 million, or $0.68 a share. Revenue fell 16.0%, to $2.2 billion from $2.6 billion. Even with the decline, the latest figure also beat the consensus estimate of $2.1 billion....

TECK RESOURCES LTD. $24 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 580.1 million; Market cap: $13.9 billion; Price-tosales ratio: 1.3; Dividend yield: 3.8%; TSINetwork Rating: Average; www. teck.com) is down 35% since we made it our Stock of the Year for 2013.

The drop is mainly because slowing industrial activity in China and elsewhere has hurt prices for its metallurgical coal, which is a key ingredient in steelmaking. In 2012, coal accounted for 45% of Teck’s revenue, and 51% of its earnings.

In response to the weaker demand, Teck and other coal producers are cutting production. That should support prices as steelmakers use up their inventories. Moreover, Teck has built strong relationships with its major customers, so they are unlikely to switch to other coal suppliers. Teck’s high-quality coal also helps steelmakers improve their efficiency.

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TECK RESOURCES LTD. $24 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 580.1 million; Market cap: $13.9 billion; Price-tosales ratio: 1.3; Dividend yield: 3.8%; TSINetwork Rating: Average; www. teck.com) is down 35% since we made it our Stock of the Year for 2013.

The drop is mainly because slowing industrial activity in China and elsewhere has hurt prices for its metallurgical coal, which is a key ingredient in steelmaking....

TECK RESOURCES LTD., $26.27, Toronto symbol TCK.B, reported lower quarterly revenue and earnings this week. That’s mainly because slowing industrial activity in China and elsewhere has hurt prices for its metallurgical coal, which is a key ingredient in steelmaking. Prices of Teck’s other commodities, such as copper and zinc, also declined. In the three months ended March 31, 2013, Teck earned $328 million, or $0.56 a share. These figures exclude unusual items, such as gains and losses on asset sales. On that basis, the latest earnings beat the consensus estimate of $0.41 a share. However, they are down 39.7% from $544 million, or $0.93 a share, a year earlier. Revenue fell 8.5%, to $2.3 billion from $2.5 billion. Even with the decline, the latest figure also beat the consensus estimate of $2.2 billion....

TECK RESOURCES LTD., $25.21, Toronto symbol TCK.B, fell 10% this week, along with other mining stocks, mainly due to concerns about weakening economic growth in China. The Chinese economy grew by 7.7% in the first three months of 2013, down from 7.9% in the fourth quarter of 2012. The latest figure also fell short of the consensus estimate of 8% growth. China is a major consumer of coal, copper and other resources, so the news pushed down the prices of these commodities. As well, British Columbia environmental regulators have ordered Teck to develop a plan to reduce runoff from its coal mines because it is polluting adjacent rivers. The company estimates that building water-diversion systems and treatment facilities will cost $600 million over the next five years. To put that in context, Teck earned $1.5 billion, or $2.60 a share, in 2012....

Canadian Tire Corp., Toronto symbols CTC.A, $71.75, and CTC, $86.00 (Shares outstanding: 81.1 million; Market cap: $5.9 billion; www.canadiantire.ca), has two classes of shares: The common shares (symbol CTC) carry one vote per share and the class A shares (symbol CTC.A) are non-voting. Investors can buy either class of share. Canadian Tire is a recommendation of our Successful Investor newsletter. Most firms with two classes of shares have a “coattail provision,” which aims to ensure that both share classes have equal rights in the event of a takeover. So if you hold non-voting or subordinate-voting shares, you won’t miss out on a takeover bid. For example, Canadian Tire’s non-voting class A shares would carry one vote per share in the event of a takeover offer, just like the common shares....

TECK RESOURCES LTD., $28.73, Toronto symbol TCK.B, fell 6% this week, along with other mining stocks, partly due to concerns about the outlook for prices of coal, copper and other commodities. China is a major resource consumer, and growth in the country has slowed along with its exports to Europe and the U.S. China’s inflation rate is also rising, which could make it more difficult to spur growth through stimulus spending or lower interest rates. As well, investors are concerned that Teck may buy control of privately held Iron Ore Company of Canada (IOC); Rio Tinto (New York symbol RIO) is IOC’s largest shareholder, with a 58.7% stake. This company mines and processes iron ore in Labrador City, Newfoundland. Trains then take the iron ore pellets to the port of Sept-Îles, Quebec, for shipment to steel mills around the world....

TECK RESOURCES LTD., $33.11, Toronto symbol TCK.B, reported better-than-expected earnings for 2012. However, concerns over lower prices for coal, copper and other commodities caused the stock to fall 10% this week. In 2012, Teck’s earnings fell 38.5%, to $1.5 billion, or $2.60 a share. These figures exclude unusual items, such as gains on asset sales. On that basis, the latest earnings beat the consensus estimate of $2.48 a share. In 2011, Teck earned a record $2.5 billion, or $4.18 a share. Revenue fell 10.2%, to $10.3 billion from $11.5 billion. The company met its production targets for all of its key commodities. However, the slow global economy hurt prices for its coal (down 24.9%), lead (down 13.8%), molybdenum (down 13.3%), silver (down 11.4%), zinc (down 11.1%), and copper (down 9.8%)....