37 slides from Teck Resources Limited Class A's earnings presentation, Jul 25, 2019
Slide 1: Second Quarter 2019 Results
Second Quarter 2019 Results July 25, 2019
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 3: Highlights
Highlights • Updated capital allocation framework and increased share buyback by $600 million to $1 billion • BC Government has endorsed the use of saturated rock fills for water treatment at our steelmaking coal operations • Implementing our RACE21TM innovation-driven efficiency program to generate
Slide 4: Capital Allocation Framework
Capital Allocation Framework SUSTAINING SUPPLEMENTAL BASE CAPEX SHAREHOLDER DIVIDEND (including stripping) DISTRIBUTIONS The balance of remaining cash is available to finance further enhancement or growth opportunities. Available Cash Flow1 plus at least 30% If there is no immediate need for this ca
Slide 5: Accelerating Our RACE21 Innovation-Driven Efficiency Program
Accelerating Our RACE21TM Innovation-Driven Efficiency Program RACE21TM • Looks across the full value chain, from mine to port • Leverages existing, proven technology to improve productivity and lower costs • Focused on delivering significant value by 2021 - 2019: Expansion of programs such as predi
Slide 6: Solid Q2 2019 Earnings
Solid Q2 2019 Earnings Q2 2019 Q2 2018 Revenue $ 3.1 billion $ 3.0 billion Gross profit before depreciation and amortization1 $ 1.4 billion $ 1.6 billion Gross profit $ 1.1 billion $ 1.2 billion EBITDA1 $ 808 million $ 1.4 billion Adjusted EBITDA1 $ 1.2 billion $ 1.4 billion Profit attributable to s
Slide 7: Earnings Adjustments in Q2 2019
Earnings Adjustments in Q2 2019 Q2 2019 Q2 2018 Profit attributable to shareholders $ 231 million $ 634 million Add (deduct): Debt prepayment option (gain) loss $ (26) million $ 15 million Debt redemption loss $ 166 million - Asset impairment $ 109 million - Taxes and other $ (21) million $ 4 millio
Slide 8: Steelmaking Coal Business Unit
Steelmaking Coal Business Unit Q2 2019 Steelmaking Coal Prices2 (US$/t) • Sales of 6.4 Mt, in line with guidance 300 • Customer sales were strong, but results were 250 200 impacted by logistical issues 150 • Quarterly production records at Line Creek and 100 Greenhills Operations 50 • Higher site un
Slide 9: Copper Business Unit
Copper Business Unit Q2 2019 Production1 (kt) • Higher mill throughput and recovery at Highland Valley 77 75 • Net cash unit costs impacted by substantially lower co-product and by-product credits • Ramp up of the additional ball mill at Highland Valley is in progress • New three-year collective agr
Slide 10: QB2 Project Update
QB2 Project Update1 Engineering1 Capital Costs1 US$330M2 Expenditures year-to-date ~92% ~60%3 Of total capital committed Procurement1 Progress1 ~88% 14.4% Overall Contracting1 Workforce4 ~96% ~3,100 Concentrator - Grinding Area. June 2019. 10
Slide 11: Critical path work front on track
Critical path work front on track Concentrator – Grinding Area First Concrete, May 20, 2019.
Slide 12: Earthworks activities are advancing in all areas
Earthworks activities are advancing in all areas with 7.7M m3 moved to date TMF Area Access Roads and Dam Abutment
Slide 13: Earthworks activities are advancing in all areas
Earthworks activities are advancing in all areas with 7.7M m3 moved to date Port Area Work Platform and Jetty Abutment
Slide 14: Zinc Business Unit
Zinc Business Unit Q2 2019 Cash Unit Costs3 (US$/lb) • Red Dog sales of zinc in concentrate above guidance 0.55 Total cash 0.51 unit costs • Higher production at Red Dog, reflecting recovery 0.03 Cash margin 0.02 from Q1 weather events for by-products • #2 Acid Plant operational at Trail Operations
Slide 15: Energy Business Unit
Energy Business Unit Q2 2019 Energy Benchmark Pricing (US$/bbl) • Higher realized prices and strong operating $80 $50 performance $40 • Production and unit operating costs reflect the $60 $30 Government of Alberta’s production curtailments, $40 $20 offset by the purchase of curtailment credits $20 $
Slide 16: Cash Flow
Cash Flow Cash Changes in Q2 20191 ($M) 4000 1,120 (599) (835) 3000 2,446 (170) (153) (101) 2000 (48) (39) (28) (64) 1,529 1000 0 Cash - start Cash flow PP&E Repurchase Capitalized Purchase and Interest and Expenditures Repayment of Dividends Other Cash - end of quarter from and stripping cancellati
Slide 17: Strong Financial Position
Strong Financial Position Investment grade credit ratings with all four rating agencies • ~C$6.8 billion of liquidity1 QB2 Funding Profile Before Escalation4 (US$M) ‒ Includes $1.6 billion in cash, with $1.0 billion in $2,052 Chile for development of QB2 Sumitomo true-up post $1,392 • QB2 project fi
Slide 18: A Transformational Time for Teck
A Transformational Time for Teck Future Value Catalysts Positioned For Transformation Growth Through Cash Returns Through Innovation: QB2/QB3 Execution to Shareholders RACE21TM Compelling Value 18
Slide 19: Appendix
Appendix Teck
Slide 20: Other Operating Income (Expense)
Other Operating Income (Expense) Simplified Settlement Pricing Adjustment Model Simplified Compensation Expense Model (Pre-tax settlement pricing adjustment in C$M) (Pre-tax share based compensation income / expense in C$M) Outstanding at Outstanding at Quarterly Pricing Outstanding at Outstanding a
Slide 21: Notes
Notes Slide 3: Highlights 1. EBITDA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” slides and “Use of Non-GAAP Financial Measures” section of the Q2 2019 news release for further information. Slide 5: Accelerating Our RACE21TM Innovation-Driven Efficiency Program 1. EBITDA is a n
Slide 22: Notes
Notes Slide 15: Energy Business Unit 1. We include 21.3% of production from Fort Hills, representing our proportionate ownership interest. Results for 2018 are effective from June 1, 2018. The 2020-2022 production guidance does not include potential near term debottlenecking opportunities. See Energ
Slide 23: Non-GAAP Financial Measures
Non-GAAP Financial Measures
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures EBITDA is profit attributable to shareholders before net finance expense, income and resource taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA before the pre- tax effect of certain types of transactions that in our judgment are not indicative of our nor
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of Basic Earnings Per Share Reconciliation of Diluted Earnings Per Share to Adjusted Basic Earnings Per Share to Adjusted Diluted Earnings Per Share Three months ended Three months ended (C$ in millions) June 30, 2019 (C$ in millions) June 30, 2019 Basic ea
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of Net Debt-to-Adjusted EBITDA Ratio & Net Debt-to-Debt-Plus-Equity Ratio (A) (B) (C) (A-B+C) Twelve months ended Six months ended Six months ended Twelve months ended (C$ in millions) December 31, 2018 June 30, 2018 June 30, 2019 June 30, 2019 EBITDA $ 6,1
Slide 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of EBITDA and Adjusted EBITDA Three months ended (C$ in millions) June 30, 2019 Profit attributable to shareholders $ 231 Finance expense net of finance income 62 Provision for income taxes 120 Depreciation and amortization 395 EBITDA $ 808 Add (deduct): De
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures Energy Business EBITDA by Entity Three months ended Three months ended Three months ended (C$ in millions) June 30, 2019 June 30, 2018 March 31, 2019 Reported as: Reported as: Reported as: Other Other Other Energy Fort Hills Energy Energy Fort Hills Energy Energy Fort Hil
Slide 29: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of Gross Profit Reconciliation of Gross Profit Margins Before Depreciation and Amortization Before Depreciation Three months ended Three months ended (C$ in millions) June 30, 2019 (C$ in millions) June 30, 2019 Gross profit $ 1,051 Revenue Depreciation and
Slide 30: Non-GAAP Financial Measures
Non-GAAP Financial Measures Steelmaking Coal Unit Cost Reconciliation Three months ended (C$ in millions, except where noted) June 30, 2019 Cost of sales as reported $ 868 Less: Transportation (250) Depreciation and amortization (199) Adjusted cash cost of sales $ 419 Tonnes sold (millions) 6.4 Per
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures Copper Unit Cost Reconciliation Three months ended Three months ended (C$ in millions, except where noted) June 30, 2019 June 30, 2019 Revenue as reported $ 646 US$ AMOUNTS1 By-product revenue (A) (90) Average exchange rate (C$/US$) $ 1.34 Smelter processing charges (B) 4
Slide 32: Non-GAAP Financial Measures
Non-GAAP Financial Measures Zinc Unit Cost Reconciliation (Mining Operations)1 Three months ended Three months ended (C$ in millions, except where noted) June 30, 2019 (C$ in millions, except where noted) June 30, 2019 Revenue as reported $ 609 Payable pounds sold (millions) (E) 177.3 Less: Trail Op
Slide 33: Non-GAAP Financial Measures
Non-GAAP Financial Measures Energy Operating Netback, Bitumen and Blended Bitumen Price Realized Reconciliations1 Three months ended Three months ended (C$ in millions, except where noted) June 30, 2019 June 30, 2019 Revenue as reported $ 295 Blended bitumen barrels sold (000’s) 4,221 Less: diluent
Slide 34: Non-GAAP Financial Measures
Non-GAAP Financial Measures Blended Bitumen Price Realized Reconciliation Three months ended (C$ in millions, except where noted) June 30, 2019 Revenue as reported $ 295 Less: Non-proprietary product revenue (9) Add back: Crown royalties 4 Blended bitumen revenue (A) $ 290 Blended bitumen barrels so
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of EBITDA Margin (C$ in millions) Six months ended June 30, 2019 Coal Copper Red Dog Other1 Teck Earnings before taxes per segmented note 1,168 243 287 (345) 1,353 Adjust non-controlling interest (NCI) for earnings attributable to shareholder (23) (10) - -
Slide 36: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reconciliation of Coal Business Unit Reconciliation of Free Cash Flow Adjusted EBITDA 2003 to (C$ in millions) Q2 2019 Cash Flow from Operations $44,743 October 1, 2008 (C$ in millions) to June 30, 2019 Debt interest and finance charges paid (5,290) Gross Profit $ 18,492
Slide 37: Second Quarter 2019 Results
Second Quarter 2019 Results July 25, 2019