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Eurasia Natural Resources is a Kazakhstan based natural resources company with operations in exploration, mining, processing, power generation, logistics and marketing. The company has a strong focus on Iron Ore, Bauxite, Ferroalloys and Manganese.
Eurasian Natural Resources posts 59% profit drop, but full year outlook positive
August 19 2009, 11:13am
Kazakhstan operating base metal mining group Eurasian Natural Resources (LSE: ENRC) reported substantial profit and revenue slumps in its interim report today, yet inspired investors with an upbeat outlook, sending the stock up more than 7%.
The miner’s revenue amounted to US$1.7 billion in the first half, down 51% year on year, while underlying EBITDA (earnings before interest, taxes, depreciation and amortization) fell 71% to US$0.6 billion. Earnings per share were down to 43 cents per share from 104 cents a year ago, while the interim dividend was half of the 12 cents per share declared in H1 2008.
Net profit declined almost 59% from last year’s US$1.34 billion to US$553 million, which, however, beat Bloomberg’s forecasts of US$315 million.
These sharp declines represent the impact the weakening raw material demand and the plummeting metal prices have had on the mining sector. The group had to cut production levels and reduce inventories to adjust to the changing market conditions.
Yet ENRC believes the worst may already be behind it, projecting a “broad improvement” in market conditions in the second half. The company said the strong domestic demand in China, which has supported the mining sector over the past year, will be sustained, while the outlook for the United States, Russia and Europe was improving.
The group said the sharp production increases recorded in the first half eclipsed expectations. Ferroalloys production in Q2 surged 31% from the Q1 levels, while primary iron ore concentrate production hiked 35% in Q2 from Q1.
“Our first-half financial and operational performance, in the face of considerable market pressures, reflected a satisfactory outcome. The group was positioned effectively to capture the upturn, and particularly the opportunity offered by China, and this has allowed a rapid recovery in production levels. Into the second half we believe that the recovery will be sustained. Additionally, we continue to pursue value-enhancing capex and acquisition opportunities, underpinned by our strong balance sheet,” said chief executive officer Johannes Sittard.
