Analysts had already downgraded estimates for Eurasian Natural Resources (ENRC) ahead of the release of its half-year results, but the figures from the Kazakh miner were still dispiriting enough to precipitate drastic hefty cuts in the half-year dividend and planned capital expenditure.
ENRC's financial performance deteriorated principally as a result of falling commodity prices, although profitability also suffered due to increases in inflation, depreciation costs and wage rates. Production volumes were down at the ferroalloys division, which, along with the iron ore segment, accounts for three-fifths of group revenues. Prices received for ENRC's iron ore products fell by between a fifth and a quarter, while ferroalloy prices shrank by almost 8 per cent. These declines fed through into a 41 per cent decline in underlying cash profits to $1.14bn (£729m), while the associated margin fell to 35.2 per cent from 48 per cent at the 2011 half-year stage.
On the outlook, ENRC expects "pricing uncertainty to persist" so it has cut its 2012 capital expenditure outlay by $300m to $2.4bn, while a long-term investment estimate of $8.8bn is now under review.
Broker Otkritie Capital forecasts full-year EPS of 65¢, down from 154¢ in 2011, and only a modest recovery to 71¢ in 2013.
| EURASIAN NATURAL RESOURCES (ENRC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 376p | MARKET VALUE: | £4.8bn | |
| TOUCH: | 376-376p | 12-MONTH HIGH: | 759p | Low: 355p |
| DIVIDEND YIELD: | 3% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 852¢* | NET DEBT: | 30% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 4.01 | 1.63 | 91.0 | 16.0 |
| 2012 | 3.25 | 0.67 | 36.0 | 6.5 |
| % change | -19 | -59 | -60 | -59 |
Ex-div: 22 Aug Payment: 4 Oct *Includes intangible assets of $2.11bn, or 164¢ a share £1=$1.57 | ||||
