What happened
Shares of Teck Resources (TECK 9.02%) had slumped more than 15% by 3 p.m. EST on Friday. Weighing on the Canadian mining company was its fourth-quarter results and outlook for 2020.
So what
Weak market conditions plagued Teck Resources during the fourth quarter. The mining company only hauled in 122 million Canadian dollars ($92 million), or CA$0.22 per share ($0.17), of adjusted profit. Not only was that well below the CA$500 million ($378 million), or CA$0.87 per share ($0.66), it earned during the year-ago period, but it was also CA$0.17 per share ($0.13) below the analysts' consensus estimate.
The main weak spot was its steelmaking coal operations, where production declined by 8.7%, and pricing plunged 31%. That more than offset the positive impact of improving Canadian oil prices on its energy business.
Image source: Getty Images.
Global economic uncertainty that weighed on commodity prices during the fourth quarter has continued this year, made worse by the impact from the coronavirus in China. On top of that, Teck has battled severe weather in British Colombia as well as blockades on rail lines, which have hampered its ability to get its production to global markets.
Because of these issues, the company has temporarily cut its output and shut down its Neptune shipping terminal in British Colombia. As a result, it now expects steelmaking coal sales to come in between 4.8 million to 5.2 million tons during the first quarter, which is below its prior estimate of 5.1 million to 5.4 million. That's leading it to reduce its full-year steelmaking-coal production guidance to 23 million to 25 million metric tons.
Now what
Teck Resources believes that the demand slowdown from the coronavirus will only have a short-term impact on its operations. But it's not yet clear how much this situation will affect the commodities market. Because of that, Teck might need to reduce its guidance again, which would likely put more pressure on its stock.
