Sherritt doubles profits, repurchases debentures

Diversified conglomerate Sherritt International (S-T) saw earnings more than double during the second quarter, thanks to a strong operating performance and higher prices for nickel and oil.

Sherritt posted net earnings of $31.9 million (or 36 per restricted voting share) during the period, up from $14.5 million (12 per share) in the second quarter of 1999, while consolidated revenue soared to $140.4 million from $96.7 million.

Net earnings in the first six months of 2000 were $66.6 million (76 per share), compared with just $17.1 million (7) in the first half of 1999.

For the third consecutive quarter, the mining and processing facilities at Moa Bay, Cuba, and Fort Saskatchewan, Alta., set a new record for production of mixed sulphides. Total production of nickel and cobalt contained in mixed sulphides was 7,199 tonnes, up 11% from 6,511 tonnes produced during the second quarter of last year. Total finished production of 6,875 tonnes of nickel and 727 tonnes of cobalt represent increases of 7% and 20%, respectively, over the comparable period in 1999.

In April, Sherritt repurchased a $25-million principal amount of its 6% convertible unsecured subordinated debentures at a price of $710 per $1,000 principal, for a total cost (including accrued interest) of $18.2 million. A further $25-million principal was repurchased on July 18 at $740 per $1,000 principal, at a cost of $18.6 million.

Sherritt’s aggregate principal amount of debentures outstanding is now $625 million, while the company’s total assets stand at $1.4 billion, including $353.1 million in cash and short-term investments.

In May, Deutsche Bank Canada — a Sherritt debenture-holder and short seller — filed a claim in the New Brunswick courts alleging that Sherritt’s conduct, including the declaration of a dividend to shareholders, had “oppressed” Sherritt’s debenture-holders.

Sherritt rejects the bank’s claims and efforts to override the Trust Indenture for debentures issued by Sherritt in 1996.

“Deutsche Bank’s case is a fundamental assault on the right of a company’s management to manage in the best interests of its security holders,” says Sherritt Chairman Ian Delaney. “Deutsche Bank is seeking court protection against risks to which it exposed itself through a highly speculative arbitrage bet made against Sherritt. Worse, it is seeking to do so at the expense of Sherritt’s security-holders more generally. We believe Deutsche Bank’s claim of oppression is wholly without merit and will vigorously fight it.”