Inco profit triples on higher nickel price

Rendi A. Witular, Jakarta

Publicly listed PT International Nickel Indonesia (Inco), a local subsidiary of the world's second largest Canada-based nickel company Inco Ltd., announced that its first-half unaudited net profit this year had more than tripled on a strong nickel price.

Inco president director Bing R. Tobing said the company had posted a US$126 million profit for the first half-year ending June, up from $36.8 million for the same period last year. Sales also jumped to $369 million from $214 million.

"Once again, strong nickel prices enhanced our earnings, as the company's average realized price in the second quarter rose by 52 percent from the second quarter of last year," said Bing in a public meeting with investors on Friday.

Inco's realized price for nickel in matte averaged $10,627 per ton or $4.82 per pound in the first semester of this year, up sharply from $6,300 per ton, or $2.86 per pound, in the same period last year.

Under the company's long-term U.S. dollar-denominated contracts, the selling price of its nickel in matte is determined by price movements on the London Metal Exchange.

The price of nickel skyrocketed to a 14-year high earlier this year, driven mainly by growing demand from producers of stainless steel and other alloys in China and the United States.

But the growing demand has outpaced supply, following operation problems at several giant nickel producers.

Inco, which operates a giant nickel mine in Soroako, South Sulawesi, produced 77.3 million pounds of nickel in the first six months of this year, up slightly from 73.6 million a year ago.

Bing said that for this year the company planned to increase its nickel production to 160 million pounds, to take advantage of an expected further surge in the price of nickel.

To boost Inco's production capacity in the future, the company was studying the possibility of building a third hydropower plant with a capacity of between 90 and 100 megawatts (MW), he said. The plant was expected to increase the company's production of nickel to more than 200 million pounds in 2009, and cut fuel oil costs.

Energy made up 35 percent of the company's costs in 2003 and most of these costs involved the purchase of fuel oil.

Inco shares surged by Rp 850 or 2.5 percent to Rp 34,400 a share on the Jakarta Stock Exchange on Friday following the news.

Regarding the settlement of the company's huge dollar- denominated debts, Bing said as of June the company had reduced its long-term debt to $154 million, from $192 million at the end of last year. The company planned to have fully repaid its remaining debt by March, 2006, he said.