Why did the mining company Teck Resources not raise the forecast?
Mining company Teck Resources Limited (TECK), despite a significant increase in sales in the past quarter, did not raise its forecast for the full year. Probably, the management fears that the rise in commodity prices is a short–term phenomenon, and inflationary pressure cannot always offset by high prices.
Canadian company Teck Resources, engaged in the extraction of copper, zinc and coal, this week reported the results of the first quarter of 2022 above Wall Street forecasts. Revenue slightly exceeded 5 billion Canadian dollars, which is almost twice as much as in the same quarter a year earlier. The key driver of growth was the increased prices of raw materials. In particular, copper has risen in price by 17% year—on—year, zinc – by 36%, and coal – by 173%.
The increased prices not only increased revenue but also helped Teck Resources to compensate for increased costs, including wages, and inflationary pressures. The company’s profit in the first quarter of 2022 increased almost fivefold compared to the first quarter of 2021: 2.96 Canadian dollars per share versus 0.61 Canadian dollars per share. But despite the excellent results of the first quarter, Teck Resources did not raise its forecast for the whole of 2022.
This can be called a reasonable position of management, which fears that the current high commodity prices may not persist even in the medium term. Teck Resources announced plans to buy back additional shares should also noted that Teck Resources continues to invest in new projects and has recently launched a new copper mining project. The news about the strong results of the quarter and the buyback supported the quotes of Teck Resources, which increased by almost 12% at the auction on April 27.
