Coal

[johnlw]

Fording Canadian earns $77-million in Q1 2007

2007-04-23 21:54 ET - News Release

Mr. Boyd Payne reports

FORDING CANADIAN COAL TRUST 2007 FIRST QUARTER EARNINGS RESULTS

Fording Canadian Coal Trust is releasing its first quarter 2007 results. Cash available for distribution for the quarter was $77-million (53 cents per unit) compared with $202-million ($1.37 per unit) in 2006.

Net income from continuing operations was $77-million in the first quarter compared with $165-million in the same quarter in 2006. Net income from continuing operations before unusual items and future income taxes was $78-million in the first quarter compared with $197-million in the same quarter of 2006, which reflects lower sales volumes and lower U.S.-dollar coal prices for the 2006 coal year compared with the 2005 coal year, higher unit cost of product sold, and lower gains realized on foreign exchange forward contracts.

"Despite a difficult first quarter, the outlook for the remainder of the year remains positive," said Boyd Payne, president, Fording Canadian Coal. "Harsh winter weather led to insufficient coal railed to the ports resulting in reduced sales volumes and lower production levels. Looking ahead, we are relying on improved rail performance to move our product to the ports and I remain confident that we can meet our annual guidance targets."

Highlights for the first quarter:

* Elk Valley Coal settled prices with approximately 90 per cent of its customers for the coal year commencing April 1, 2007, at an average price of $91 (U.S.) per ton.
* Cash available for distribution was $77-million for the quarter, or 53 cents per unit, down from $202-million, or $1.37 per unit, in 2006. Distributions to unitholders for the quarter were 65 cents per unit compared with $1.40 per unit in 2006. The first quarter distribution takes into consideration the balance of underdistributed cash from the prior year of 11 cents per unit.
* The average realized coal price in the first quarter of 2007 was $124 per ton ($105 (U.S.)). This was down from $152 per ton ($122 (U.S.)) in the first quarter of 2006, and reflects lower coal year prices that were effective April 1, 2006, and the trust's decision not to designate its foreign exchange forward contracts as hedges under the new accounting rules for financial instruments that became effective Jan. 1, 2007. Realized hedging gains contributed $11.50 per ton to the average Canadian-dollar sales price in the first quarter of 2006.
* Coal sales volumes of 2.8 million tons for the first quarter were 10 per cent lower than 2006 levels. Critically low port inventories at the beginning of the quarter and a continued shortfall in the volume of coal that the company was able to rail to the ports combined to cause this decrease. The shortfall in rail service was due primarily to the harsh winter weather in British Columbia.
* Elk Valley Coal's unit cost of product sold increased by 19 per cent to $45.80 per ton for the first quarter of 2007 compared with $38.60 for the first quarter of 2006. The increase is primarily due to unplanned shutdowns and reduced production in the first quarter of 2007 in response to rail transportation problems, higher labour costs due to settlements of certain long-term union labour contracts in 2006, and inflation in the costs of fuel, tires and other consumables. The trust's mines continued to move waste material, despite reduced production, which contributed to higher unit costs in the quarter; however, this activity is expected to contribute to lower unit costs in the remainder of the year.
* Elk Valley Coal's unit transportation costs were unchanged quarter over quarter. Demurrage costs increased by approximately $2 per ton as the rail transportation problems in the fourth quarter of 2006 and the first quarter of 2007 resulted in longer vessel wait times. Higher vessel demurrage costs were offset by a decrease in rail costs due to lower contractual rail rates than in the first quarter of 2006.
* In March, 2007, the trust entered into $950-million (U.S.) of foreign exchange forward contracts at an average forward exchange rate of 87 U.S. cents, all of which will mature before March 31, 2008. The trust enters into foreign exchange forward contracts when sales contracts for the coal year are settled. The forward contracts mature throughout the coal year in order to fix the rate at which the trust's share of anticipated receipts of U.S. dollars from coal sales, net of U.S. dollar expenses, are exchanged into Canadian dollars. This helps reduce the risk of variability of the trust's distributions arising from changes in the exchange rate for the U.S. and Canadian dollars.
* An agreement was reached for the sale of NYCO, which is expected to close in the second quarter of 2007. NYCO is classified as a discontinued operation in the accompanying financial statements.
* The trust implemented a premium distribution and distribution reinvestment plan. The plan provides a means for eligible unitholders to reinvest distributions by the trust in new units, or to exchange those new units for a premium on the cash distribution. Approximately 450,000 trust units were issued in April, 2007, in lieu of cash distributions of approximately $11-million.

Conference call and webcast

A conference call to discuss these results will be held Tuesday, April 24, at 8 a.m. (Mountain Time), 10 a.m. (Eastern Time). To participate in the conference call, please dial 1-866-540-8136 or 416-340-8010 approximately 10 minutes prior to the call. A live and archived audio webcast and podcast of the conference call will also be available on the trust's website.

 
         CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 
              (in millions of dollars except per share amounts) 
  
                                                          Three months ended 
                                                                    March 31,                                
                                                              2007      2006 
  
 Revenues                                                 $  350.5  $  473.3 
 Expenses 
 Cost of product sold                                        130.0     119.9 
 Transportation                                              107.4     117.6 
 Selling, general and administration                           5.7       7.6 
 Depreciation and depletion                                   12.1      11.1 
                                                          --------  -------- 
                                                             255.2     256.2 
 Income from operations                                       95.3     217.1 
 Other income (expense) 
 Interest (expense)                                           (5.0)     (3.8) 
 Other items, net                                             (0.8)    (30.0) 
 Income before taxes                                          89.5     183.3 
 Income tax expense                                           12.7      18.1 
 Net income from continuing operations                        76.8     165.2 
 Income from discontinued operation                            0.2       0.1 
 Net income                                               $   77.0  $  165.3 
 Other comprehensive income (loss)                            (0.7)      0.1 
 Comprehensive income                                     $   76.3  $  165.4 
 Basic and diluted amounts per unit 
 Net income from continuing operations                    $   0.52  $   1.12 
 Net income from discontinued operation                   $      -  $      - 
 Net income                                               $   0.52  $   1.12

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