HomeBase MetalsARM triples headline earnings

ARM triples headline earnings

The Nkomati Nickel
Mine – one of ARM’s
better performers
Johannesburg, South Africa — MININGREVIEW.COM — 23 February 2009 – South African diversified mining group African Rainbow Minerals (ARM) has announced good results for the six months to 31 December 2008, despite the global economy experiencing a sharp downturn in the latter part of this period.

The group operational review released here today revealed that headline earnings had increased by 201% to R2 232 million (1H F2008: R741 million), or 1 055 cents per share, driven mainly by the strong performance from ARM Ferrous, which had delivered a 390% increase in attributable headline earnings.

It added that the ARM balance sheet remained strong at 31 December 2008 with net cash, before partner loans, of R1.1 billion – an improvement of R0.9 billion from the 30 June 2008 results. In the current economic climate ARM had focused on rightsizing its operations, deferring some of the capital expenditure and optimising its cash resources through working capital and cost management.

The review explained that these results had been achieved in conjunction with ARM’s partners at the various operations, namely Anglo Platinum, Assore, Impala Platinum, Norilsk Nickel and Xstrata Coal.

It said that while the global slowdown had weakened demand for all commodities, iron ore, thermal coal and PGMs had reflected improved sales volumes despite these challenges. Key operational contributors for the period under review included:

  • a 5% increase in iron ore sales to 3.5 million tonnes;
  • a 10% reduction in manganese ore external sales to 1.3 million tonnes;
  • an 8% increase in domestic thermal coal sales (excluding discard dumps) to 5.65 million tonnes;
  • a 14% increase in attributable PGM production to 153 157 ounces; and
  • a 43% reduction in manganese alloys and charge chrome sales volumes.

ARM said it remained satisfied with the progress of its projects at Khumani Iron Ore, Goedgevonden Coal and Nkomati Nickel. New challenges had emerged over the last few months – including significantly lower US dollar commodity prices and delays with the provision of additional railway line capacity – and the company was continuing to assess qualitative growth opportunities.

Returning to the results, the review showed that sales had increased 61% to R6.4 billion, compared to the six months ended 31 December 2007 – mainly as a result of increased commodity prices and increased volumes.

It added that despite the pressures of cost increases the gross profit margin had increased to 50.8% in this period from 41.9% a year earlier. ARM’s earnings before interest, tax, depreciation and amortisation (EBITDA), excluding exceptional items and income from associates, was R3.7 billion, which represented an increase of R1.9 billion..

ARM’s balance sheet at 31 December 2008 reflected growth in both total assets to R28.3 billion (31 December 2007: R18.0 billion), and total shareholders’ equity to R17 billion (31 December 2007: R10.4 billion).