The half-year losses reported by International Ferro Metals surprised some analysts. But a combination of self-help measures and more favourable market conditions should result in a recovery later this year.
Most notably, the global ferrochrome market is strengthening as production of stainless steel - for which it is a key raw material - recovers. Supply is tight and spot prices are higher. Meanwhile, the South African rand is weakening, which will reduce input costs.
Production in the first half was 5 per cent lower than in the corresponding period last year. But chief executive David Kovarsky is confident that the furnace upgrade set for completion by the end of August will allow the furnaces to achieve their official capacity rate of 265,000 tonnes a year by October. This should not only increase output, but also lower costs and improve efficiency.
Managers plan to cut costs further by retreating mined waste from the UG2 platinum mining reef in South Africa; replacing depleting open pit operations with the new Sky Chrome open pit mine; and commissioning an electricity co-generation plant. Analysts are updating their forecasts in light of these improvements.
| INTERNATIONAL FERRO METALS (IFL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 20p | MARKET VALUE: | £111m | |
| TOUCH: | 19.75-20.25p | 12-MONTH HIGH: | 53p | LOW: 20p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 435¢* | NET DEBT: | 12% | |
| Half-year to 31 Dec | Turnover (ZARm) | Pre-tax profit (ZARm) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 452 | -145 | -19.1 | nil |
| 2010 | 851 | -160 | -19.1 | nil |
| % change | +88 | - | - | - |
£1=ZAR11.59 *NAV 37.5p | ||||
