PD rides copper wave

Stronger copper prices and fewer taxes enabled Phelps Dodge (PD-N) to more than double its profits in the third quarter.

Net earnings in the three months ended Sept. 30 topped US$39.3 million (or US50 per share) on revenue of US$1.2 billion, compared with US$15.4 million (US27 per share) on revenue of US$743 million in the third quarter of 1999. Interest payments and non-recurring charges were actually up in the recent quarter, but they were more than offset by higher copper prices and US$5.4 million in tax savings.

Cash flow rose to US$148.6 million from US$70.6 million, reflecting higher metal prices and increased production that stemmed from the takeover of Cyprus Amax in October 1999.

Higher electricity and fuel costs continue to hamper operations, eroding US$22 million from operating earnings. The major expects power availability and rates to improve as weather patterns in the southwestern U.S. return to normal.

Phelps Dodge cranked out 364,900 tons copper (less 64,000 tons to minority partners) in the recent quarter. This is up significantly from a year ago, reflecting the Cyprus acquisition.

Copper sales, in turn, jumped 54% to 407,100 tons, of which 294,900 tons came from the company’s own mines. The metal was sold for an average of US87 per lb., or US9 more than a year ago, helping to increase by 103% mining revenue year-over-year.

For the first nine months of the year, net earnings totalled US$20.9 million (or US27 per share) on revenue of US$3.4 billion, compared with losses of US$45.1 million (US78 per share) on US$2.1 billion a year earlier. The strength of the recent quarter helped offset heavy restructuring charges in the previous one.

Cash flow for first nine months of the current year were US$313.1 million, compared with US$116.6 million in the year-ago period. Again, higher sales volumes and copper prices accounted for the increase.

Capital expenditures or investments totalled US$291 million for the recent 9-month period, and another US$109 million is expected to be spent by year-end.

On Sept. 30, Phelps Dodge had US$148.3 million in working capital and just over US$2 billion in long-term debt. Although the major owes less than it did at the start of the year, its debt-to-capitalization has risen slightly to 45.5%.

Phelps Dodge had US$245.9 million in cash or equivalents on Sept. 30.