Making profits and growing despite global economic crisis
23 February 2009
African Rainbow Minerals Limited today announced its interim results for the six months ended 31 December 2008.
- Strong headline earnings increase of 201% from R741 million to R2 232 million or 1 055 cents per share
- Profit from operations before exceptional items increases 120% from R1.5 billion to R3.3 billion
- Increased sales volumes of PGMs, iron ore and domestic thermal coal
- Increased sales prices for coal, ferrous commodities and alloys
- Strong balance sheet: cash balance of R3.66 billion reflects an increase of R2.5 billion
- Significant benefits from diversification of mining activities
- ARM transaction with Vale on African exploration nearing closing
The company announced good results for the six months to 31 December 2008, with significant increases in earnings contributions from ARM Ferrous and ARM Coal, despite the global economy experiencing a sharp downturn in the latter part of this period. Headline earnings 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 delivered a 390% increase in attributable headline earnings.
The ARM balance sheet remains 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 has focused on right-sizing its operations, deferring some of the capital expenditure and optimising its cash resources through working capital and cost management.
“ARM is well positioned to continue to grow and be profitable despite the current global economic crisis”, said Executive Chairman Patrice Motsepe.
The global slowdown has weakened demand for all commodities. However, iron ore, thermal coal and PGMs reflected improved sales volumes despite these challenges.
Key operational contributors for the period under review include (100% basis, except for PGM production):
- 5% increase in iron ore sales to 3.5 million tonnes
- 10% reduction in manganese ore external sales to 1.3 million tonnes
- 8% increase in domestic thermal coal sales (excluding discard dumps) to 5.65 million tonnes
- 14% increase in attributable PGM production to 153 157 ounces
- 43% reduction in manganese alloys and charge chrome sales volumes
As part of ARM’s strategy to ensure the efficiency and cost competitiveness of all its operations, ARM is targeting to have its operations within the 50th percentile on the global unit cost curve by 2012. Mining costs for this period increased above the inflation rate, but some easing to these cost increases is expected. ARM has been able to control and manage unit cost increases by increasing production volumes (where possible) and operational efficiencies.
The transaction with Companhia Vale do Rio Doce (Vale) has been approved by the requisite majorities of TEAL Exploration & Mining (TEAL) shareholders and is nearing closing. This will result in TEAL becoming a 50:50 joint venture with Vale.
ARM remains satisfied with the progress of its projects at Khumani Iron Ore, Goedgevonden Coal and Nkomati Nickel. New challenges have emerged over the last few months, including significantly lower US Dollar commodity prices and delays with the provision of additional railway line capacity. ARM is continuing to assess qualitative growth opportunities.
ARM has achieved numerous safety achievements, including Modikwa attaining 4 million Fatality Free Shifts. Regrettably, two fatalities occurred during the period under review, and ARM extends sincere condolences to the families of the deceased.
Chief Executive Officer, Andr� Wilkens said: “The outlook for commodity demand in calendar year 2009 remains weak amidst a significant downturn in the global economy. However ARM is in a good position to effect any changes that may be necessitated by the demand and prices of the commodities which we produce.
He continued: “ARM will continue to pursue positive operating cash flows at all operations focusing on cost control and working capital management.”
For all investor relations queries please contact:
Corporate Development & Head of Investor Relations
Office: +27 11 779 1507
Mobile: +27(0) 83 411 2881
Office: +27 11 779 1300
Mobile: +27 (0) 83 380 6614