High interest rates take toll on Noranda’s profit

Stung by high interest rates, Noranda (TSE) saw its third- quarter net income plunge to $18 million (1 cents per share), down from $101 million (49 cents per share) in the year-earlier period. The 82% profit drop sent the company’s share price tumbling to $14.50, only $3 above the low of $11.50 reached in the last recession of 1982.

Noranda’s 9-month income also fell to $133 million (51 cents per share) on revenue of $7.3 billion, down 65% from $384 million ($1.94 per share) on revenue of $6.9 billion in the 1989 period.

“The strong Canadian dollar in combination with high interest rates are continuing to take their toll,” said Noranda President David Kerr.

He also said the poor results reflect a substantial loss in the company’s forest division and reduced production at some of its mining operations which were affected by strikes.

In the third quarter, the company’s interest expense doubled to $132 million from $65 million, while the 9-month interest expense ballooned to $359 million, compared with $191 million last year. As of Sept. 30, Noranda’s long- term debt stood at $3.99 billion.

On the positive side, quarterly earnings from Noranda’s minerals division tripled to $51 million from $17 million, reflecting the addition of production from 50% owned Falconbridge Ltd. For the 9-month period, minerals income rose to $187 million, up 45% from $129 million a year ago.

In addition to a strong quarter at Falconbridge, the company enjoyed higher copper prices and improved results from its Geco, Matagami and Heath Steele base metal mines.

“These factors more than compensated for lower zinc prices and the strike at Brunswick’s mine and smelter operations,” said Noranda.

Exploration expenditures rose to $31 million in the third quarter, up from $25 million in the year-earlier period. Nine-month exploration expenses were $84 million, up from $68 million a year ago.

Meanwhile, Noranda’s forest division lost $5 million in the third quarter, compared with a profit of $50 million in the 1989 period.

“The dramatic decline reflects mounting weakness in all markets for forest products and includes the costs of market-related shutdowns and delays in the startup of new capital projects,” said Noranda.

The manufacturing division’s third-quarter results declined to $23 million from $34 million a year earlier, reflecting lower aluminum prices and weakness in the markets for wire and cable products.

However, higher oil prices and production kept Noranda’s energy division in the black with income of $16 million, the same level as last year. NORANDA (TSE)* 3 months ended Sept. 30 1990 11989 Revenue $2,235,000 $2,163,000 Net earnings 18,000 101,000

per share 0.01 0.49 9 months ended Sept. 30 Revenue $7,276,000 $6,881,000 Net earnings 133,000 384,000

per share 0.51 1.94