African Rainbow Minerals sees FY earnings drop

15 September 2009 | 05:07 Code : 19512 Geoscience events
Diversified miner African Rainbow Minerals (ARM) (ARIJ.J: Quote) on Monday...

Diversified miner African Rainbow Minerals (ARM) (ARIJ.J: Quote) on Monday reported a 43% fall in full-year earnings, hit mainly by weaker manganese sales, but forecast stronger demand for some of its products.ARM, which has interests in nickel, coal, iron ore, platinum, chrome and manganese, said it expects market conditions to pick up slightly in the coming financial year."There have been some early signs of improvement in demand for certain commodities," it said in a statement."Given the forecast, it is quite disappointing, but from a cash perspective, it’s encouraging," said a Johannesburg-based analyst, who declined to be named."They are paying less dividend than I thought they would, but I suppose they are being a bit conservative."ARM’s earnings were hit by lower demand for manganese, used in carbon steel production. External sales of manganese ore dropped 42 percent during the year to 2.15 million tonnes.They were also hit by a stronger rand against the U.S. dollar. ARM sells most of its metals in U.S. dollars and pays for its costs in rand.The South African miner’s headline EPS -- the main profit gauge in South Africa -- fell to 1,094 cents compared with 1,906 cents the previous year, at the upper end of its own forecast of a drop to between 1,025 and 1,150 cents. Headline EPS strips out certain one-off, financial and non-trading items.ARM said it had increased its cash balance to 3.5 billion rand ($448.1 million) and declared an annual dividend of 175 cents per share.The company, which develops its ferrous assets in a 50-50 joint venture with metals trading group Assore (ASRJ.J: Quote), shut three ferromanganese furnaces at its Cato Ridge operations to match supply with demand on the back of the economic slowdown.ARM’s results were boosted by higher production of iron ore, with sales of the metal up 13% to 7.4 million tonnes.The company said it had completed the expansion of its Khumani iron ore mine to produce 10 million tonnes per year, and has approved a further expansion to 16 million tonnes by 2012.ARM’s coal business was hit by lower demand, both inland and for exports, and further impacted by logistical constraints of bringing the coal to the port.ARM said its balance sheet remained strong and would allow to further expand its nickel, iron ore and coal operations.The company’s is ramping up thermal coal production at its Goedgevonden mine to 6.7 million tonnes per year and is due to increase production of nickel at the Nkomati mine to 20,000 tonnes per year.ARM said it has refinanced a loan of 967 million rand and increased it to 1.75 billion rand, maturing in August 2012. ($1=7.811 Rand) (Additional reporting by Agnieszka Flak; Editing by Mike Nesbit)

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