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International Ferro keeps a lid on costs

More problems with South Africa's grid meant that this was another troublesome year for International Ferro Metals, but the company is now well positioned to boost ferrochrome production while further reducing unit costs.
September 19, 2011

South African ferrochrome producer International Ferro Metals (IFM) has successfully driven down its operating costs in response to "unfavourable industry conditions", but a 2 per cent reduction in ferrochrome sales volumes, combined with a strengthening rand, led to widening full-year losses.

IC TIP: Buy at 17.5p

IFM also had to contend with design problems at the company's furnaces, which reduced ferrochrome output by 3 per cent to 194,869 tonnes. Operating costs were forced to bear a 23 per cent increase in the annual power bill from state provider Eskom. However, the company managed to reduce underlying production costs by 4 per cent year on year, after adjusting for a near-8 per cent appreciation of the rand against the US dollar and the Eskom rise.

IFM has targeted a further 10 per cent reduction in controllable costs in 2012, as savings kick in from increased power input from the cogeneration plant, and the completion in October of the UG2 chrome re-treatment plant. The rise in revenues was mainly due to ore sales of ZAR179m (£15.1m).

INTERNATIONAL FERRO METALS (IFL)
ORD PRICE:17.5pMARKET VALUE:£100m
TOUCH:17-18p12-MONTH HIGH:37pLOW: 12p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE*:ZAR4.30NET DEBT:13%

Year to 30 JunTurnover (ZARbn)Pre-tax profit (ZARm)Earnings per share (¢)Dividend per share (¢)
20070.18-344-83.0nil
20081.926301141.00
20090.78-456-66.0nil
20101.43-157-15.4nil
20111.58-214-24.1nil
% change+10---

*Converted at £1:ZAR11.88