Miner Kazakhmys benefited from a 73 per cent increase in average copper prices to deliver half-year earnings that marginally beat brokers' expectations. Demand remained firm in the period and the group has contracts in place covering the remainder of the year, evenly split between European and Chinese customers.
Copper production remains on track for just over 300,000 tonnes in the year. Longer-term, a $2.7bn (£1.7bn) debt facility will support the development of projects that should grow annual production to over 500,000 tonnes over the next five years. In particular, the feasibility study at Bozshakol should be completed by the year-end and work continues towards a partnership with Chinese group Jinchuan at Aktogay.
Gross cash costs rose 31 per cent to 187¢ per pound, although a sharp rise in by-products revenue curbed net cash costs to 85¢ per pound. However, management concedes that local inflation of around 7 per cent could add to pressures from rising diesel and steel costs and the potential strengthening of the Kazakhstan tenge against the US dollar, to increase costs further. Subject to by-products prices remaining favourable, the group expects full-year net costs of 90¢-120¢ per pound, which would keep Kazakhmys competitive.
Non-copper activities contributed some 25 per cent of revenues. In the power business, a 43 per cent increase in net power generated was lifted by a 61 per cent increase in the average electricity tariff, and the plant is undergoing a $1bn investment to raise capacity from 2,500 megawatts to 4,000 megawatts. The 26 per cent stake in fellow miner ENRC is worth £2.8bn.
Administration costs rose 33 per cent to $224m, which includes $130m relating to major social projects. Higher prices led to a sharp increase in operating cash flows, although these were offset by the timing of tax payments to leave net operating cash inflow broadly unchanged at $466m.
Prior to these results, Evolution Securities was forecasting full-year pre-tax profit of $1.44bn and EPS of 240¢.
| KAZAKHMYS (KAZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,108p | MARKET VALUE: | £5.93bn | |
| TOUCH: | 1,107-1,108p | 12-MONTH HIGH: | 1,634p | LOW: 902p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 1,367¢ | NET DEBT: | 9% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2009 | 1.12 | 666 | 101 | nil |
| 2010 | 1.52 | 631 | 94 | 6.00 |
| % change | +36 | -5 | -7 | - |
Ex-div: 8 Sep Payment: 5 Oct £1=$1.552 | ||||
