Key financials at Teck Resources
Previously in this series, we learned why low energy prices are a risk for Teck Resources (TCK). Meanwhile, most of the company’s energy projects are in construction phase. This basically means that energy prices won’t affect Teck until 2017, when its oil sands project comes online. For its other business segments, however, the impact of lower average selling prices is already visible.
Revenue has come down
The above chart shows key financials at Teck Resources. As you can see, its revenues have fallen over the last couple of years. In 2014, it posted revenues of 8.6 billion Canadian dollars, down 8.3% from the previous year. In fact, Teck’s revenues have decreased for three consecutive years. This is largely due to corrections in copper and coal prices.
Copper prices reached their peak in 2011. Since then, they’ve lost more than 40%. Average selling prices for Teck’s coal segment also fell 23% last year on a year-over-year basis.
Lower coal and copper prices have taken a toll on Teck Resources’ profit margins also. The above chart shows its EBITDA (earnings before interest, taxes, depreciation, and amortization) margin. As you can see, this margin fell to 27.8% in 2014, down from 40.8% in 2012.
Other copper producers including Freeport-McMoRan (FCX) and Turquoise Hill Resources (TRQ) are also affected by the fall in copper prices. FCX currently forms 3.25% of the SPDR S&P Metals and Mining ETF (XME). Stillwater Mining Company (SWC) forms 3.7% of XME.
Teck Resources leverage ratios are another casualty of lower commodity prices. We’ll discuss this in detail in the next part of our series.