Steel Maker Unveils $695 million Full Year Loss

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Tuesday, August 20th, 2013
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Mining and steel manufacturing company Arrium has unveiled a $695 million after tax amid substantial declines in iron ore prices and continued weak manufacturing and construction conditions in Australia.

Mining and steel manufacturing company Arrium has unveiled a $695 million after tax amid substantial declines in iron ore prices and continued weak manufacturing and construction conditions in Australia.

After making a $58 million profit the previous year, the company says a $961 million hit due to asset impairments and restructuring costs relating to its steel business caused it to incur a net loss after tax of $695 million in the full financial year of 2012/13.

Meanwhile, underlying net profit after tax dropped from $195 million to $168 million.

In a statement, Arrium attributed the fall in profits to lower prices for iron ore in its mining business, which it says more than offset benefits from increases iron ore volumes and higher earnings in its mining consumables and steel manufacturing businesses.

But company managing director Andrew Roberts highlighted a number of positives, saying an expansion of the firm’s mining capacity had been delivered on time and within budget, the mining and consumables performed well and the steel business lifted earnings (EBITDA) by 15 percent despite deteriorating domestic and international markets.

“The year was a very significant one in our growth as a Mining and Materials company” Roberts says. “In June, our Mining business reached a sales run rate for iron ore of 12Mtpa, marking the on time and on budget delivery of our expansion to double the size of the business – a pleasing achievement.”

Arrium’s result follows Monday’s announcement by fellow steel making giant BlueScope of an $84 million after tax loss in 2012/13.

Arrium Ltd Profit Summary 2013

Around the world, steel makers are being hit by low prices amid weak conditions in manufacturing and construction – a situation which in Australia has been exasperated by weak domestic demand and (until recently) the high Australian dollar.

In Arrium’s case, the company is undergoing a significant restructuring of its steel business which will see the divesture of non-core operations and properties – the sale of which largely prompted the aforementioned write-downs – and consolidation of remaining assets into a single operating unit.

Encouragingly, however, the steel unit did its earnings ($76 million) on an Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) basis by 15 percent off a low base from the previous year, and Roberts says the restructuring, along with the lower dollar, will deliver further improvement still.

Arrium’s net debt as at June stood at $2.115 billion, down from $2.143 billion as at June 30 2012.

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