Sherritt stock falls after bigger Q4 loss and dividend cut amid low commodities

TORONTO - Sherritt International Corp. (TSX:S) stock fell sharply Wednesday after it reported a $673.8 million net loss and said its dividend will be reduced by 76 per cent so it can use the cash elsewhere.

The Toronto-based company's shares fell 28 cents or 8.75 per cent to $3.13 at mid-morning. Earlier, the stock traded as low as $3.02, equal to a multi-year low hit in December.

Sherritt is a diversified resource company producing nickel, cobalt and other mined commodities as well as oil and gas and electrical power. Several of its major operations are in Cuba and Madagascar.

Under standard accounting, Sherritt says its fourth quarter net loss amounted to $2.27 per share, including a $136.8 million net loss or 46 cents per share from continuing operations.

In the comparable period of 2012, Sherritt had a $16.9 million net loss, or six cents per share, as $7.2 million or two cents of net income from continuing operations, partially offset $24.1 million in losses elsewhere.

Also Sherritt reported a $38.1 million adjusted net loss in the fourth quarter, equal to 13 cents per share, as a result of a $466.8 million impairment charge related to the coal business and other items.

Sherritt agreed in December to sell its mining coal operations to Colorado-based Westmoreland Coal in a deal valued at $465 million, including $312 million cash and the assumption of capital leases.

Sherritt also sold its royalty portfolio and coal development assets for $481 million cash to a group led by Altius Minerals Corp. of St. John's, NL. (TSX:ALS)

Analysts had expected Sherritt's adjusted earnings would break even. However, Sherritt said Wednesday that, while it would receive about $946 million from the sale of its coal assets, accounting rules require that the assets be recognized at fair value — resulting in an impairment charge of $466.8 million or $1.57 per share.

A number of other impairments, provisions and other items combined to bring Sherritt's total adjustments for the quarter to $635.7 million or $2.14 per share.

The company also told shareholders Wednesday that its quarterly dividend will be cut to one cent per common share, starting with the April 14 payment, down from 4.3 cents.

At the modified payout level, the annual cost of the dividend will be reduced by approximately $39 million in 2014, Sherritt said.

It said reduced payout to shareholders was prudent given persistently low commodity prices and its near-term funding requirements, particularly for the Ambatovy nickel project in Madagascar.

David Pathe, Sherritt's president and chief executive, said the company's simplified asset base will increase its financial flexibility and reduce its cost structure.

He added that its metals and its oil and gas businesses performed well in 2013.

"In 2014, we will focus on strengthening our balance sheet through debt and additional cost reduction initiatives, while investing prudently in the areas of core strengths — metals and Cuba," Pathe said.

"Our efforts will be directed to building the long-term competitiveness and value of our businesses, while maintaining our financial flexibility in light of persistently challenging market conditions."