Mining and materials group Arrium has blamed weak iron ore prices for a $1.5 billion first half loss, and it expects the low prices to persist.
The result included $1.34 billion in impairments, flagged in January when it axed 600 jobs and said it would close one of its two iron ore projects in South Australia.
Stripping out the impairments, the company still made a $22 million underlying net loss.
“External factors, including the sharp and substantial fall in iron ore prices, as well as historic low South East Asian steel margins, made the half a very challenging one,” Arrium chief executive Andrew Roberts said.
However, he said, better earnings overall for the group were predicted for the second half. He said the current over-supply and negative sentiment in the iron ore market were expected to continue.
The company achieved an average price of $US68 a tonne in the six months to December 31, down from $US127 the previous year.
Earnings before interest, tax, depreciation and amortisation (EBITDA) were up 16 per cent to $101 million in the mining consumables business. The company expected continued strong demand for grinding media, particularly in North and South America underpinned by high copper and gold production.
There was on-going weakness in international and domestic steel markets, with EBITDA down to $16 million from $21 million.
Arrium said it expected domestic construction activity to continue to improve from its low base.
Second half earnings, particularly in the fourth quarter, were expected to benefit from increased sales volumes, a sustained lower Australian dollar, increased Southeast Asian steel margins and reductions to the business cost base.
No dividend was declared.