Record-breaking results highlight Inco meeting

The company, which has racked up five consecutive record quarters, is poised to break the $1 billion-mark in earnings this year, say some analysts. That view was supported indirectly by the comments of Inco chairman and chief executive officer Donald Phillips.

“At the present time we see little possibility of any significant increase in the immediate supply of nickel. We also see no significant signs of a decrease in demand,” he told the meeting. “The remainder of 1989 could, therefore, continue to be very rewarding.”

With 34% of the market share, Inco is the world’s largest producer of nickel and is reaping the benefits of an unprecedented commodities boom. The company’s average realized price for nickel increased to $4.81 per lb in 1988 from $2.18 the year before. During the first quarter of this year, Inco’s average realized price climbed to $6.59 per lb.

The bonanza is helping make Inco’ management and board look very good. Late last year, the board approved a controversial shareholders rights plan which was coupled to a special $10 (US) per share dividend. The plan, which received shareholder approval, came under attack once again at the meeting. William Allan, president of Allenvest, an institutional fund manager, made a proposal to have the plan terminated.

“The board opposes the proposal because removal of the rights plan would again expose shareholders to abusive takeovers,” Phillips told the meeting. An American shareholder argued for the proposal, saying that the plan gave too much power to Inco’s board — power which could enable the board to reject potentially attractive cash takeover offers.

Of the 54 million shares voted, 71% opposed the Allenvest proposal to terminate the rights plan.

Concerns that the special dividend, which totalled $1 billion, would become an excessive debt burden, were allayed by Phillips.

“I am pleased to advise you that by mid-year we expect our debt to be about 45% of our total capitalization compared to 62% immediately after the payment of the special dividend,” he said. That improvement was even more impressive considering that Inco had paid its final 1988 tax installment of $430 million during the first quarter of this year, he said.

The company’s immense cash surplus, which came in at $870 million at year-end, is helping fund $350 million in capital expenditures this year — up from $229 million last year. Also, a bold sulphur dioxide abatement program at Sudbury, budgeted at $400 million over the next five years, is being financed without government aid. The program will enable Sudbury’s smelter to remove more than 90% of contained sulphur from smelter emissions when completed.

There was also a hint from Phillips that another special dividend might be considered by the board. He said that because of the continuing good results, the company is reviewing opportunities to enhance shareholder value “such as share repurchases and special dividends.”

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