Inco's 2003 profit tripled on higher nickel prices

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.