44 slides from Teck Resources Limited Class A's earnings presentation, Jul 23, 2020
Slide 1: Second Quarter 2020 Results
Second Quarter 2020 Results July 23, 2020
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements Both these slides and the accompanying oral presentation certain forward-looking information and forward-looking statements as defined in applicable securities laws (collectively referred to as forward-looking statements). These statements relate to futur
Slide 3: Second Quarter 2020 Highlights
Second Quarter 2020 Highlights • Continuing to operate responsibly and safely to support economic recovery • Took steps to: ‒ Further strengthen our financial position ‒ Reduce costs; and ‒ Position Teck to significantly improve margins towards the end of 2020 and early 2021, as we complete major ca
Slide 4: Second Quarter 2020 Earnings
Second Quarter 2020 Earnings Impacted by COVID-19 Q2 2020 Q2 2019 Revenue $ 1.7 billion $ 3.1 billion Gross profit before depreciation and amortization1 $ 453 million $ 1.4 billion Gross profit $ 139 million $ 1.1 billion EBITDA1 $ 177 million $ 827 million Adjusted EBITDA1 $ 485 million $ 1.3 billi
Slide 5: Second Quarter 2020 Earnings & Adjusted Earnings
Second Quarter 2020 Earnings & Adjusted Earnings (C$M) Q2 2020 Q2 2019 Profit (loss) attributable to shareholders $ (149) $ 231 Add (deduct) on an after-tax basis: Asset impairment - 109 COVID-19 costs 147 - Environmental costs 69 25 Inventory write-downs (reversals) 38 9 Share-based compensation 17
Slide 6: Key Updates: COVID-19 Impact on our Business
Key Updates: COVID-19 Impact on our Business • All operations are currently producing • Economic impacts of the pandemic have reduced demand and prices for our products • Expensed $260 million in COVID-19 costs in Q2 2020 6
Slide 7: Key Updates: Steelmaking Coal Business Update
Key Updates: Steelmaking Coal Business Update • Focus on increasing margins, not volumes • Q2 2020 sales were 5 million tonnes • Shifting our cost base lower due to: - Declining strip ratio - Elkview plant expansion - Cardinal River closure - Cost Reduction Program - RACE21TM 7
Slide 8: Key Updates: QB2 Update
Key Updates: QB2 Update • Construction ramping back up, with over 3,000 people currently on site • Planning to continue a gradual ramp up of the construction workforce over the next three months towards the pre-suspension workforce level, as conditions allow - Expect to have ~4,000 people on site by
Slide 9: Key Updates: Neptune Facility Upgrade Progress
Key Updates: Neptune Facility Upgrade Progress • Project remains in line with our previously announced capital estimate and schedule • Five-month suspension of terminal operations began in May 2020 • Completion of construction expected in Q1 2021 The new double dumper barrels, staged at Neptune in J
Slide 10: Key Updates: Strong Financial Position
Key Updates: Strong Financial Position • Reduced near-term debt maturities and further strengthened liquidity by adding a US$1 billion revolving credit facility • Continue to focus on our cost reduction program • Achieved significant reductions as at June 30, 2020: ‒ ~$250 million1 in operating cost
Slide 11: Key Updates: Guidance Update
Key Updates: Guidance Update • Issued updated guidance for H2 2020 • Changed categories for capital expenditures guidance to sustaining capital, growth capital or capitalized stripping • Nearing the end of the major capital deployment phase for Neptune and Active Water Treatment Facilities at Elkvie
Slide 12: Steelmaking Coal Business Unit
Steelmaking Coal Business Unit Q2 2020 • Sales were 5.0 Mt, despite steelmakers cutting production faster than during the Global Financial Crisis in 2008/09 • Adjusted site cash cost of sales1 of $68 per tonne reflects lower sales volumes Updated 2019A H1 2020A H2 2020 Guidance • Production averaged
Slide 13: Copper Business Unit
Copper Business Unit Q2 2020 • Production reflects temporary suspension of operations at Antamina, which ramped up to full production ahead of plan • Highland Valley gradually ramped back up to full production rates • Significantly lower total cash unit costs2 reflect our Updated 2019A H1 2020A H2 2
Slide 14: QB2 Update
QB2 Update Construction activities partially suspended since mid-March • Strict COVID-19 protocols in place to protect the health and safety of our workers and communities where we operate Planning to continue a gradual ramp up of the construction workforce over the next three months, as conditions
Slide 15: Zinc Business Unit
Zinc Business Unit Q2 2020 • Lower Red Dog production due to maintenance challenges and lower grades • Red Dog zinc sales of 93 kt, in line with seasonality • Lower net cash unit costs2 • Trail’s zinc production impacted by annual zinc roaster Updated 2019A H1 2020A H2 2020 Guidance maintenance Prod
Slide 16: Energy Business Unit
Energy Business Unit Q2 2020 • Fort Hills Partners safely and efficiently reduced operations to a single train facility in Q2 2020, which helped reduce negative cash flows in light of COVID-19 and unprecedented low Western Canadian Select prices Updated 2019A H1 2020A H2 2020 • Inventory write-down
Slide 17: Cash Flow
Cash Flow Cash Changes in Q2 2020 ($M) 2000 888 (792) 1000 300 (97) (78) (52) (40) (26) 14 336 219 0 Cash - start Cash flow from Net proceeds from PP&E Capitalized Interest and Expenditures on Repayment of Dividends paid Other Cash - end of quarter operations debt issuance stripping finance charges
Slide 18: COVID-19 Expenditures
COVID-19 Expenditures • Costs related to capital projects that do not COVID-19 Expenditures qualify for capitalization are expensed as $260 million in Q2 2020 incurred in other operating income (expense) Cost of sales • Costs not directly related to production are $34M Other operating expensed as in
Slide 19: Cost Reduction Program (CRP)
Cost Reduction Program (CRP) • Achieved significant total reductions to June 30, 2020: ‒ ~$250 million in operating cost reductions ‒ ~$430 million in capital cost reductions • Our cost reduction program has been included in our guidance since Q3 2019 • No change to previous target of ~$1 billion •
Slide 20: Strong Financial Position
Strong Financial Position Further Strengthened Liquidity Maintaining Investment Grade Credit Ratings • C$6.9 billion of liquidity1 as at July 22, 2020, including $430 million in cash Reduced Near-Term Debt Maturities • US$5.0 billion available through two committed • Issued US$550 million of 3.9% 10
Slide 21: Summary
Summary • Quality operating assets in stable jurisdictions • Copper growth strategy - funded and being implemented • Continuing to advance our key priorities to generate long term value for shareholders: 1. QB2 Project 2. Neptune Facility Upgrade 3. RACE21TM 4. Cost Reduction Program Significant pot
Slide 22: Appendix
Appendix Teck
Slide 23: Other Operating Income (Expense)
Other Operating Income (Expense) Simplified Settlement Pricing Adjustment Model Simplified Compensation Expense Model (Pre-tax settlement pricing adjustment in C$M) (Pre-tax share based compensation income / expense in C$M) 100 60 20 -20 Q2 2020 -60 -100 -140 -180 -$1.20 -$0.80 -$0.40 $0.00 $0.40 $0
Slide 24: Notes
Notes Slide 4: Second Quarter 2020 Earnings 1. Gross profit before depreciation and amortization, EBITDA, adjusted EBITDA, adjusted profit attributable to shareholders, adjusted basic earnings per share and adjusted diluted earnings per share are non-GAAP financial measures. See “Non-GAAP Financial
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures
Slide 26: Non-GAAP Financial Measures
Non-GAAP Financial Measures Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This document refers to a number of Non-GAAP Financial Measures which are not measures recognized under IFRS
Slide 27: Non-GAAP Financial Measures
Non-GAAP Financial Measures Net cash unit costs – Net cash unit costs of principal product, after deducting co-product and by-product margins, are also a common industry measure. By deducting the co- and by-product margin per unit of the principal product, the margin for the mine on a per unit basis
Slide 28: Reconciliation of Profit (Loss) and Adjusted Profit
Non-GAAP Financial Measures Reconciliation of Profit (Loss) and Adjusted Profit Three months ended Three months ended Six months ended Six months ended (C$ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Profit (loss) attributable to shareholders $ (149) $ 231 $ (461) $ 861 Add
Slide 29: Reconciliation of Basic Earnings Per Share to Adjusted
Non-GAAP Financial Measures Reconciliation of Basic Earnings (Loss) Per Share to Adjusted Basic Earnings (Loss) Per Share Three months ended Three months ended Six months ended Six months ended (Per share amounts) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Basic earnings (loss) per shar
Slide 30: Reconciliation of Diluted Earnings Per Share to Adjusted
Non-GAAP Financial Measures Reconciliation of Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share Three months ended Three months ended Six months ended Six months ended (Per share amounts) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Diluted earnings (loss) per share
Slide 31: Reconciliation of Net Debt to Adjusted EBITDA Ratio
Non-GAAP Financial Measures Reconciliation of Net Debt to Adjusted EBITDA Ratio (A) (B) (C) (A+B+C) Twelve months ended Three months ended Three months ended Twelve months ended (C$ in millions) December 31, 2019 June 30, 2019 June 30, 2020 June 30, 2020 Profit (loss) $ (588) $ 894 $ (496) $ (1,978)
Slide 32: Reconciliation of Net Debt to Adjusted EBITDA Ratio - Continued
Non-GAAP Financial Measures Reconciliation of Net Debt to Adjusted EBITDA Ratio - Continued (A) (B) (C) (A+B+C) Twelve months ended Three months ended Three months ended Twelve months ended (C$ in millions) December 31, 2019 June 30, 2019 June 30, 2020 June 30, 2020 Total debt at period end (F) $ 4,
Slide 33: Reconciliation of EBITDA and Adjusted EBITDA
Non-GAAP Financial Measures Reconciliation of EBITDA and Adjusted EBITDA Three months ended Three months ended Six months ended Six months ended (C$ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Profit (loss) $ (185) $ 250 $ (496) $ 894 Finance expense net of finance income 11
Slide 34: Reconciliation of Gross Profit Before Depreciation and Amortization
Non-GAAP Financial Measures Reconciliation of Gross Profit Before Depreciation and Amortization Three months ended Three months ended Six months ended Six months ended (C$ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Gross profit $ 139 $ 1,051 $ 537 $ 2,093 Depreciation and a
Slide 35: Reconciliation of Gross Profit Margins Before Depreciation
Non-GAAP Financial Measures Reconciliation of Gross Profit (Loss) Margins Before Depreciation Three months ended Three months ended Six months ended Six months ended (C$ in millions) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Revenues Steelmaking coal (E) $ 792 $ 1,588 $ 1,815 $ 3,140 C
Slide 36: Steelmaking Coal Unit Cost Reconciliation
Non-GAAP Financial Measures Steelmaking Coal Unit Cost Reconciliation Three months ended Three months ended Six months ended Six months ended (C$ in millions, except where noted) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Cost of sales as reported $ 734 $ 868 $ 1,511 $ 1,694 Less: Trans
Slide 37: Copper Unit Cost Reconciliation
Non-GAAP Financial Measures Copper Unit Cost Reconciliation Three months ended Three months ended Six months ended Six months ended (C$ in millions, except where noted) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Revenue as reported $ 405 $ 646 $ 975 $ 1,276 By-product revenue (A) (41) (
Slide 38: Zinc Unit Cost Reconciliation (Mining Operations)
Non-GAAP Financial Measures Zinc Unit Cost Reconciliation (Mining Operations)1 Three months ended Three months ended Six months ended Six months ended (C$ in millions, except where noted) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Revenue as reported $ 479 $ 609 $ 1,087 $ 1,321 Less: Tr
Slide 39: Zinc Unit Cost Reconciliation - Continued
Non-GAAP Financial Measures Zinc Unit Cost Reconciliation (Mining Operations)1 - Continued Three months ended Three months ended Six months ended Six months ended (C$ in millions, except where noted) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Payable pounds sold (millions) (E) 173.4 177
Slide 40: Energy Operating Netback and Bitumen Price Reconciliations
Non-GAAP Financial Measures Energy Operating Netback, Bitumen & Blended Bitumen Price Realized Reconciliations Three months ended Three months ended Six months ended Six months ended (C$ in millions, except where noted) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Revenue as reported $ 44
Slide 41: Energy Operating Netback Reconciliations - Continued
Non-GAAP Financial Measures Energy Operating Netback, Bitumen & Blended Bitumen Price Realized Reconciliations - Continued Three months ended Three months ended Six months ended Six months ended (C$ in millions, except where noted) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Per barrel a
Slide 42: Reconciliation of Coal Business Unit Adjusted EBITDA
Non-GAAP Financial Measures Reconciliation of Coal Business Unit Adjusted EBITDA October 1, 2008 to (C$ in millions) June 30, 2020 Gross Profit $ 19,463 Add back: Depreciation and amortization 7,466 Gross profit, before depreciation and amortization $ 26,929 Deduct: Other costs (422) Adjusted EBITDA
Slide 43: Reconciliation of Free Cash Flow
Non-GAAP Financial Measures Reconciliation of Free Cash Flow 2003 to (C$ in millions) Q2 2020 Cash Flow from Operations $47,166 Debt interest and finance charges paid (5,652) Capital expenditures, including capitalized stripping costs (26,853) Payments to non-controlling interests (NCI) (642) Free C
Slide 44: Second Quarter 2020 Results
Second Quarter 2020 Results July 23, 2020