24 slides from Teck Resources Limited Class A's earnings presentation, Feb 14, 2018
Slide 1: Fourth Quarter 2017 Results
Fourth Quarter 2017 Results February 14, 2018
Slide 2: Forward Looking Information
Forward Looking Information Both these slides and the accompanying oral presentation contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario).
Slide 3: 2017 Highlights
2017 Highlights • Solid operating results • Record revenues and cash flow from operations for the full year • Returning cash to shareholders: ‒ Paid $260M in dividends in Q4 2017, including $230M supplemental dividend ‒ Committed to $230M in buybacks through March 31, 2018 • Achieved our debt reduct
Slide 4: Record Cash Flow
Record Cash Flow Q4 2017 2017 Revenue $3.2 billion $12.0 billion Gross profit $1.7 billion $6.1 billion before depreciation & amortization1 Gross profit $1.3 billion $4.6 billion Adjusted EBITDA1 $1.5 billion $5.7 billion Adjusted profit $700 million $2.6 billion attributable to shareholders1 $1.21/
Slide 5: Strong Q4 2017 Earnings
Strong Q4 2017 Earnings $M Q4 2017 2017 Profit attributable to shareholders $760 $2,509 Add (deduct): Debt repurchase (gains) losses - 159 Debt prepayment option loss (gain) 10 (38) Asset sales & provisions (4) (29) Foreign exchange losses (gains) 15 (4) Collective agreement charges - 29 Environment
Slide 6: Copper Business Unit
Copper Business Unit Q4 2017: Net Cash Costs2 (US$/lb) • Production1 up 6 kt vs. Q4 2016 • Net cash costs2 down US$0.18/lb due to strong cash 1.45 credits for by-products 1.27 • Significant increase in gross profit3 vs. Q3 2016 • Last of three labour agreements settled at Quebrada Blanca Q4 2016 Q4
Slide 7: Zinc Business Unit
Zinc Business Unit Q4 2017: Mined Zinc Production1,2 (kt) • All concentrate shipped out of Red Dog before end of shipping season 171 • Mined zinc production1,2 up 19 kt vs. Q4 2016 152 • Now 20% Qanaiyaq ore in Red Dog mill feed blend Looking Forward Q4 2016 Q4 2017 • Expect Red Dog mined zinc sales
Slide 8: Steelmaking Coal Business Unit
Steelmaking Coal Business Unit Q4 2017: • Shifting to a demand-driven market Annual Gross Profit Before • Sales negatively impacted by two CP mainline Depreciation & Amortization2 ($M) derailments and underperformance at Westshore 3,769 • Average realized price of US$170 per tonne Looking Forward: 2
Slide 9: Energy Business Unit
Energy Business Unit Currently: PFT Diluted Bitumen has a Lower • Fort Hills achieved first oil on January 27, 2018 Carbon Intensity Than Around Half of • First train from secondary extraction is producing; the Barrels of Oil Refined in the US, second and third trains mechanically complete on a Well
Slide 10: Strong Shareholder Returns
Strong Shareholder Returns • First supplemental dividend of $230M paid in Dividends Paid $600 December 2017 • $230M committed to share buybacks through Q1 2018 $500 ‒ $175M completed in Q4 2017 • Strong track record of returns to shareholders $400 ‒ $4.1B of dividends and $1.2B of buybacks from $M $
Slide 11: Creating Value
Creating Value Advancing growth projects in 2018 Fort Hills • First of three trains from secondary extraction ramping up production through Q1 2018 • Second and third trains expected to start producing in H1 2018 NuevaUnión • Advancing prefeasibility study, which we expect to complete in Q1 2018 Que
Slide 12: Cash Flow
Cash Flow Cash Changes in Q4 2017 2500 1,464 (546) 2000 (257) (178) $ Millions 1500 (175) (160) (95) 10 952 1000 889 500 0 Cash - start Cash flow PP&E, incl. Dividends Capitalized Purchase Expenditures Debt interest Other Cash - end of quarter from Fort Hills paid stripping and on financial and fina
Slide 13: Strong Financial Position
Strong Financial Position Debt Maturity Profile3 • ~$1B in cash + US$3 billion undrawn 1,200 1,000 Repaid in credit line, maturing Oct. 2022 800 February = ~$4.8B of liquidity1 US$M 600 • Waneta Dam transaction - not expected 400 200 to close before Q3 2018 0 = additional $1.2B cash2 2018 2020 2022
Slide 14: Capital Expenditures Guidance 2018
Capital Expenditures Guidance 2018 2018 (Teck’s share in CAD$ millions) 2017 Guidance Sustaining Steelmaking coal1 $ 112 $ 275 Copper 126 180 Zinc 168 230 Energy2 34 40 Corporate 4 5 2018 $ 444 $ 730 (Teck’s share in CAD$ millions) 2017 Guidance Major Enhancement Capitalized Stripping Steelmaking co
Slide 15: Our Value Proposition
Our Value Proposition Superior Strong Financial Disciplined Capital Execution Position Allocation • Premier operating assets • Significant liquidity • Debt reduction • Proven track record • Record cash flow accomplished • Enhancing profitability • The right commodities at • Asset portfolio the right
Slide 16: Appendix
Appendix Teck
Slide 17: Other Operating Income (Expense)
Other Operating Income (Expense) Simplified Settlement Pricing Adjustment Model Simplified Compensation Expense Model 100 20 Pre-Tax Share-Based Compensation 10 Q4 2017 Pre-tax Settlement Pricing 50 0 Income (Expense) (C$M) Adjustment (C$M) -10 0 -20 -30 -50 -40 -100 -50 -60 Q4 2017 -150 -70 -$0.75
Slide 18: Notes
Notes Diversified Peers are Anglo American, BHP Billiton, Glencore, Rio Tinto, South32 and Vale. North American Peers are Freeport-McMoRan, First Quantum, Lundin and Southern Copper. Slide 4: Record Cash Flow 1. Gross profit before depreciation and amortization, adjusted EBITDA, and adjusted profit
Slide 19: Notes
Notes Slide 8: Steelmaking Coal Business Unit 1. Steelmaking coal unit costs are reported in Canadian dollars per tonne. Site costs exclude deferred stripping and capital expenditures. 2. Gross profit before depreciation and amortization. Non-GAAP financial measure. See “Use of Non-GAAP Financial Me
Slide 20: Notes
Notes Slide 13: Strong Financial Position 1. Approximately $4.8 billion in liquidity as at February 13, 2018. 2. Closing of the Waneta Dam transaction is subject to receipt of regulatory approval and other customary conditions. 3. Maturity profile of public notes outstanding as at December 31, 2017.
Slide 21: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA, as disclosed on slide 13 is profit attributable to shareholders before net finance expense, income and resource taxes, and depreciation and amortization. Adjusted EBITDA, as disclosed on slide 4 is EBITDA before the pre-tax effect of certain types of transactions
Slide 22: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of Free Cash Flow (C$ in millions) 2003 to 2017 Cash Flow from Operations $38,682 Debt interest and finance charges paid (4,672) Capital expenditures, including capitalized production stripping costs (18,893) Free Cash Flow $15,117 Dividends paid $4, 101 Pa
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of Net Debt-to-EBITDA Ratio & Net Debt to Debt-Plus-Equity Ratio Twelve months ended (C$ in millions) December 31, 2017 Adjusted EBITDA (A) $ 5,697 Total debt at period end 6,369 Less: cash and cash equivalents at period end (952) Net debt (C) 5,417 Less: E
Slide 24: Fourth Quarter 2017 Results
Fourth Quarter 2017 Results February 14, 2018