Inco's Q1 net profit falls 31%

Leony Aurora, The Jakarta Post, Jakarta

Publicly listed PT International Nickel Indonesia (Inco) has announced a 31 percent drop of unaudited net income in this year's first quarter on higher production costs and shipping delays.

The company, a local subsidiary of the world's second-largest nickel producer Inco Ltd., said in a written statement recently that its net profit fell to US$50.9 million in the first three months of 2005 from $73.4 million recorded in the same period a year earlier.

Unit production cost rose by 28 percent in the three months ending on March 31 to $2.14 per pound from $1.67 per pound the previous year as the price of high sulfur fuel, which is used to fire up the companies furnaces when hydropower is absent, climbed to an average of $30.46 per barrel from $26.80, respectively.

"With higher recent rainfall, reservoir dam levels at PT Inco's hydroelectric facilities are returning to normal," the company's president and CEO Bing Tobing said.

Sales declined 11 percent to $170.9 million in the quarter from $191.9 million in the corresponding quarter of 2004 due to slightly lower prices and a delay in shipments.

"We expect the delayed March shipment to be made in late April," Bing said.

Although Inco produced 38.1 million pounds of nickel in matte in the year's first quarter, it sold only 32.7 million pounds. In the corresponding period last year, Inco produced and sold 36 million pounds of nickel in matte.

The Sulawesi-based nickel producer assured that it remained on target to achieve its production goal of 160 million pounds.

Inco aims to boost its output capacity to 200 million pounds of nickel matte by 2009 by constructing a 90-megawatt hydropower plant in Karebbe, Southeast Sulawesi.

The company currently operates a giant nickel mine in Sorowako, Southeast Sulawesi, with two dams to support the existing production process.

The estimated cost for the four-year dam construction project rose to up to $280 million from an initial $250 million due to changes in the site's geotechnical conditions and rising commodity prices, the company said.

Inco paid $38.5 million of its debts in March, reducing its outstanding loan balance of long-term debt to $76.9 million.

It more than doubled its net profit last year as global nickel prices skyrocketed to a 14-year high, driven mainly by growing demand from producers of stainless steel and other alloys in China and the U.S.