Improved trading boosts Assore’s profits

Headline earnings likely jump by up to 28 percent in 2019 financial year, owing to improved trading conditions

MINING and trading company Assore yesterday told shareholders that headline earnings would likely jump by up to 28 percent in the 2019 financial year, owing to improved trading conditions.

It projected headline earnings would increase to R6.53 billion in 2019 from R5.1bn in 2018 as the iron ore price reached highs on supply concerns following the Vale accident in Brazil and the rand weakened.

“Prices for iron ores were higher, with prices for manganese ores at similar levels to 2018. However, prices for chrome ore and manganese alloys were lower,” said the group.

Headline earnings a share would jump to R63.31 a share from R49.53 a share, said Assore, which operates Australian-based explorer IronRidge and the Gloria Mine, a manganese operation in the North West.

It flagged that the world manganese alloy market was oversupplied and this had weighed heavily on the group’s smelting operation in Malaysia.

“This situation continued and worsened in the second half of 2019, which resulted in a cumulative impairment charge of R507 million, relating to Assore’s indirect effective interest in Sakura Ferroalloys, Malaysia,” the company said.

Assore said the write-down would hurt attributable earnings, which were likely to increase by up to 19 percent to R6bn, compared to R5.11bn in 2018.

Attributable earnings per share were anticipated to be up to R58.85 a share from R49.63 a share in 2018.

“The group’s revenues were augmented by a weakened exchange rate, with the average rand/US dollar rate being 10 percent weaker than in the 2018 financial year,” it said.

Assore’s principal investments include a 50 percent interest in Assmang, which it controls jointly with ARM, and its 100 percent interest in Dwarsrivier chrome mine, which it acquired in 2016.

Assmang holds a 54.36 percent interest in Sakura, a low cost ferro manganese producer, which was officially opened in 2017.

Sakura’s two major shareholders are Sumitomo Corporation, Japan, with 26.64 percent and China Steel Corporation in Taiwan, owning 19 percent.

Chrome ore and manganese alloys are used in the production of crude and stainless steel.

The company has previously highlighted that global economic growth, together with demand and supply dynamics, drove US dollar prices for commodities, while the level of exchange rates, combined with these prices, had a direct bearing on its financial performance.

The Chinese authorities’ enforcement of more stringent environmental controls had a positive impact on the demand for the group’s higher quality products in 2018 and it experienced strong cash generation resulting in net cash increasing by 56 percent to R7.9bn last year.

China produces 50 percent of the world’s crude steel and 53 percent of stainless steel.

Last year the company was in a position to declare a record total dividend of R22 a share, compared to R14 a share in 2017.