The jump in International Ferro Metal’s full-year revenues is attributable to the re-firing of both ferrochrome production furnaces in April and August last year. Having turned the furnaces off in November 2008 as global demand collapsed, last year’s full-year production ramped up 82 per cent to 200,440 tonnes with sales volumes surging 87 per cent.
Group operations were more efficient, with production costs falling 8 per cent. But unfortunately, factors outside the industry limited overall margin improvement. Electricity unit prices surged a massive 54 per cent, the rand appreciated an average 16 per cent against the US dollar across the year and labour wages increased. This all contributed to a cash loss of ZAR58.9m (£5.3m) compared with ZAR396m the prior year, although the business did turn in a cash profit of ZAR43.4m in the second half.
The outlook continues to improve as stainless steel production - for which ferrochrome is used - is expected to reach a record 30.8m tonnes in 2011. Costs are also expected to reduce further and as China continues to develop, chairman Tony Grey says “there is no doubt that the future will require the industry to be healthy and expanding.”
Broker Numis Securities forecasts full-year EPS of around 5.5p and sees "good long-term value in the shares", placing a target price of 60p.
International Ferro Metals (IFL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 29p | MARKET VALUE: | £ 161m | |
| TOUCH: | 29-30p | 12-MONTH HIGH: | 56p | LOW:23p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | ZAR4.62 | NET CASH: | ZAR47m | |
| Year to 30 Jun | Turnover (ZARm) | Pre-tax profit (ZARm) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 184 | -344 | -83.0 | nil |
| 2008 | 1919 | 630 | 114.0 | 1.0 |
| 2009 | 782 | -456 | -66.0 | nil |
| 2010 | 1434 | -157 | -15.4 | nil |
| % change | +83 | - | - | - |
| £1=ZAR11.1 (South African Rand) | ||||
