Phelps Dodge profit soars on strong copper prices

Phelps Dodge profit soars on strong copper prices

Phelps Dodge Corp., which is being acquired by Freeport McMoRan Copper & Gold Inc., reported a ten-fold increase in fourth-quarter profit on Monday as it cashed in on higher copper prices.

The price of copper averaged $3.20 a pound in the quarter, up from $1.95 a year earlier. The red metal, which peaked at around $3.80 a pound last May, stood at $2.55 a pound on Monday.

In what may be its last financial report as an independent company, Phelps Dodge said it produced about the same amount of copper in the fourth quarter as a year earlier, but the higher price pushed revenue up nearly 50 percent to $3.24 billion.

Net earnings were $1.3 billion, or $6.50 per share, compared with $121 million, or 60 cents per share, a year earlier.

Analysts’ average earnings forecast was $4.22 per share, according to Reuters Estimates.

“We continue to benefit from strong prices for copper and molybdenum, each of which reflects solid market fundamentals,” said Steven Whisler, Phelps Dodge chairman and chief executive.

Phelps’ recent earnings have been constrained because the company locked in portions of its 2006 and 2007 copper production at prices below market prices, which have soared six-fold in the last three years.

But in the fourth quarter, it said changes in the value of its hedges boosted earnings by $156.7 million, or 77 cents per share.

Shares of the Phoenix-based company were down 98 cents to $123.29 in midday trade on the
New York Stock Exchange.

In the fourth quarter of 2005, when the price of copper was rising, the company took a big charge for its hedging on forward selling contracts. In addition, year-ago earnings were hurt by production problems at a big mine in Chile and special charges totaling $204 million for writing down the value of assets, provisions for environmental issues, and other items.

Last November, Freeport McMoRan said it would buy much larger Phelps Dodge for $26 billion in cash and stock to create the world’s largest publicly traded copper company.

On Monday, Whisler said he expected the deal to close in the current quarter, after shareholder meetings in March.

Source: Reuters

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