Revenue up, earnings down for Fording (April 27, 2004)

Calgary-based Fording Canadian Coal Trust (FDG-T), a continuation of predecessor Fording, posted net income of $10.7 million in the recent first quarter, down from $147.3 million a year earlier.

Revenues were up 9% at $245 million, owing to higher coal sales, though these were offset somewhat by a stronger Canadian dollar. Income from operations in the latest quarter reached $9 million, compared with $30 million in the first three months of 2003.

Rail transportation problems resulted in delays with vessel loadings, which, in turn, increased costs and slowed sales. President James Popowich says rail service has since returned to normal levels and that the backlog of vessels waiting to load coal has been cleared.

Popowich adds that the 2003 and 2004 first quarters are not directly comparable as one-time gains skewed results in 2003, and also because of differing interests in assets held by the Trust and the predecessor company.

Looking ahead, Popowich expects strong operating results for the balance of the year and into 2005, owing to strong demand for coal. Also, price increases are expected to be reflected in the second quarter.

Fording’s coal assets include its 65% interest in Elk Valley Coal, which operates six open-pit mines in British Columbia and Alberta. A key development this year is the start of development at the Cheviot Creek pit at the Cardinal River operations in Alberta, proceeding on schedule and on budget.

Fording’s share of initial coal production will be 1 million tonnes per year at projected capital costs of $33 million. This can be increased to 1.8 million tonnes annually, with additional capital costs of $46 million.

Fording is evaluating a proposal to allow Teck Cominco (TEK-T), a 35% partner at Elk Valley Coal, to increase its interest to 40% by making operating improvements.