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Teck Resources Sees Q4 Earnings Significantly Below Market Consensus

Teck Resources Limited (TECK.A.TO, TECK.B.TO, TECK) announced Thursday that it currently expects to report earnings and EBITDA for the fourth quarter of 2018 significantly below current consensus estimates.

According to the firm, the disappointing results of Teck's Energy Business Unit and Trail Operations, as well as inventory valuations, could account for the bulk of the difference between expected financial results and consensus estimates. These factors together reduce earnings by C$0.30 per share and EBITDA by C$195 million.

For the quarter, the company expect to report a loss of C$92 million before depreciation and amortization and inventory writedowns in Energy Business Unit, resulting in an after tax loss of C$86 million or C$0.15 per share.

The company said the dramatic widening of heavy oil differentials had a significant negative impact on its results in the quarter. From US$29.80 per barrel at the beginning of October, the price of Western Canadian Select dropped to a low of US$6.42 per barrel in late November before recovering and ending the year at US$24.66 per barrel, with the index averaging only US$19.35 per barrel during the quarter.

In addition, Teck's diluent costs increased significantly during the fourth quarter of 2018 due to a seasonal increase in diluent consumption and an unusual widening in the spread between diluent and WCS.

At Trail Operations, the company expects to record a fourth quarter loss of C$23 million before depreciation and amortization and inventory write-downs, resulting in an after tax loss of C$31 million or C$0.05 per share.

As a result of the decline in commodity prices, Teck will record pre-tax inventory write-downs totaling C$80 million.

In the after hours trading on the NYSE, Teck shares were losing around 0.3 percent to $24.29.

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