Sherritt International shares drop on lower-than-expected earnings

The miner reported a jump in quarterly operating profit on the back of stong metal prices but net income fell because of forex losses and tax adjustments

TORONTO (Reuters) - 

Miner and energy producer Sherritt International Corp (S.TO: Quote) reported a higher quarterly operating profit on Wednesday on stronger commodity prices, but its shares fell 3.8 percent as earnings missed expectations.

The Canadian company, whose main assets are in Cuba and Madagascar, said higher average realized prices for nickel, cobalt, coal and oil helped boost its operating profit. Net results dropped, however, hurt by a foreign exchange loss and tax adjustments.

Net income in the quarter ended June 30 fell to C$15.7 million ($15.2 million), or 5 Canadian cents a share, down from a year-earlier profit of C$24.4 million, or 8 Canadian cents.

Operating earnings for the quarter were C$86.9 million, compared with C$51.6 million in the year-before quarter.

Excluding an unrealized after-tax foreign exchange loss and an adjustment for future income tax expenses, adjusted earnings came in at C$52.9 million, or 18 Canadian cents a share.

Analysts, on average, had expected adjusted earnings of 23 Canadian cents a share, according to Thomson Reuters I/B/E/S/.

Revenue rose 20 percent to C$431 million.

Nickel sales volumes dropped 14 percent while cobalt fell 6 percent due to a scheduled refinery shutdown. Sherritt said the decrease was offset by rising global prices for nickel and cobalt.

Sherritt Chief Executive Ian Delaney described the results as "another delightfully boring quarter" with good earnings and a good operating performance.

The Toronto-based company said its 40 percent owned, $4.5- billion Ambatovy nickel mine project in Madagascar was still on track for completion in early 2011.

The joint venture with Japan's Sumitomo Corp, Korea Resources [KOREC.UL] and SNC-Lavalin (SNC.TO: Quote) is expected to produce 60,000 tonnes of nickel and 5,600 tonnes of cobalt per year.

The company also said it purchased for C$45 million the 50 percent interest in the Coal Valley Partnership in Alberta it did not already own. This adds 2.6 million tonnes of export thermal coal to Sherritt's production assets.

Sherritt's Cuban operations include nickel, oil and gas, and power generation.

The company's shares closed down 3.8 percent at C$6.80 on the Toronto Stock Exchange on Wednesday.

($1=$1.04 Canadian) (Reporting by Euan Rocha and Julie Gordon; Editing by Peter Galloway)

© Thomson Reuters 2010 All rights reserved

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