Phelps Dodge anticipates second-quarter loss

Denver — Phelps Dodge (PD-N) anticipates a net loss in the second quarter, due to lower-than-expected copper prices and higher energy costs.

Lower copper prices are expected to decrease the company’s full-year income tax provision, resulting in a US$50-million charge against second-quarter earnings.

This combines with a US$8-million charge for implementing its US$150-million cost-cutting plan, leading Phelps Dodge to expect to post a net loss of up to $1.48 per share.

“At today’s lower copper prices, our income tax expense is driven largely by taxes on earnings from international operations, which cannot be offset by losses from domestic operations,” says Steven Whisler, Phelps Dodge’s chairman. “Although the revised effective tax rate negatively impacts our second-quarter earnings, our cash from operating activities remains strong.”

The company’s outlook for the rest of the year remains optimistic. Due to its cost-cutting program, it expects to see a US4-per-lb. reduction in unit production costs over the first quarter of the year. Unit costs should continue falling through the end of the year, reaching US8 per lb.

However, Phelps Dodge has downgraded its estimation of the copper price on the New York Commodity Exchange to US75 per lb. in the second quarter and up to US80 for the year.