Inco's 2003 profit tripled on higher nickel prices

Rendi A. Witular, The Jakarta Post, Jakarta

Publicly listed PT International Nickel Indonesia (Inco), a local unit of the world's second largest nickel company Inco Ltd., announced that its audited net profit more than tripled last year on the back of higher nickel output and price.

In a report to the Jakarta Stock Exchange (JSX) late on Thursday, the company said it had booked US$104.2 million in profit, up from $30.3 million in 2002. Sales also jumped by 58 percent to $509 million from $321 million.

"Our annual production of 155 million pounds of nickel in matte (last year) was the highest in our history and substantially above our initial target of 140 million pounds," said Inco chief executive officer Bing R. Tobing in a statement.

In 2002, Inco produced 131.2 million pounds of nickel.

Bing explained that the surge in the company's profit and sales was mostly attributable to the sharp increase in the global price of nickel, with the company's realized price for nickel in matte averaging $7,117 per ton ($3.23 per pound) last year, up from $5,114 ($2.32) in 2002.

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

At the same time, the company was also planning to reduce its outstanding long-term debt balance, which currently stands at $192.3 million, Bing said without disclosing the size of the planned debt reduction.

Inco shares surged on the JSX on Friday by Rp 3,000 to Rp 37,500 per share following the news, after declining to the level of Rp 33,000 in the last couple of weeks.

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

But the growing demand outpaced supply, following an operation commotion at several giant nickel producers; a three-month labor strike hit the Inco mine in Ontario, Canada, and a labor dispute rocked Falconbridge Ltd, the world's third largest nickel producer.

Declines in the value of the U.S. dollar, in which nickel is priced, against other currencies such as the euro have also contributed to the rising prices. The dollar has weaken by around 15 percent against the euro this year.

But according to OAO GMK Norilsk Nickel, the world's largest nickel producer, as quoted by several foreign media, the current surge in nickel prices was mostly due to speculated investment funds, rather than industry fundamentals.

The company said that labor strike issues at several nickel producers were used by global investment funds to speculate on nickel prices.

Due to the rampant speculation, Moscow-based Norilsk projected that nickel prices this year would not be as strong as last year. The company produces 20 percent of the world's nickel supply.