Teck can handle lower coal prices

Article Excerpt

TECK RESOURCES LTD. $39 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 589.5 million; Market cap: $23.0 billion; Price-to-sales ratio: 2.4; Dividend yield: 1.0%; SI Rating: Average) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Coal accounted for 46% of Teck’s 2009 revenue, and 54% of its earnings. Teck also produces copper (28%, 31%) and zinc (26%, 15%). Thanks to higher coal and copper prices, Teck’s earnings rose 110.1% in the three months ended June 30, 2010, to $376 million from $179 million a year earlier. In July 2009, Teck sold $1.7 billion of class-B subordinate-voting shares to a Chinese sovereign wealth fund, and used the proceeds to pay down debt. Because of the extra shares outstanding, earnings per share rose 74.2% in the latest quarter, to $0.64 from $0.37. Revenue rose 23.6%, to $2.1 billion from $1.7 billion. Cash flow rose 59.2%, to $675 million from $424 million. Cash flow per share rose 32.1%, to $1.15…

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