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CIBC Cuts Fording Canadian Coal Trust to Underperform


CIBC downgrades Fording Canadian Coal Trust (FDG) to underperform from sector perform, citing expectations that the company's cash flow will decline as coal prices fall in the second quarter.

Analyst Petro Panarite says the company will also cease to benefit from forex hedging activity, which will fall off sharply after the first quarter. Meanwhile share prices are aggressive right now. He notes that 24 million to 25 million tonnes of 2006 sales volumes guidance was reduced to 22 million to 25 million tonnes, with 5.7 million tonnes of first quarter sales volumes cut to 5 million tonnes. He says that C$1.40 first quarter 2006 distribution (vs. $1.60 in the fourth quarter of 2005) are below his $1.60 expectation.


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