Kenmare Resources reports slump in half-way figures

28th Aug 2013 07:31

Kenmare Resources said it was tightening the rein on costs after reporting a net loss and a drop in revenues in the first half. The company recorded a net loss of $10.2m, compared to a net profit of $38.8m the prior year, as revenues fell to $79.3m from $109.1m.Operating profit declined to $6.9m from last year's $47m and earnings before interest, tax, depreciation and amortisation (EBITDA) decreased to $18.8m from $55.5m.While production volumes of heavy mineral concentrate (HMC) and ilmenite rose by 24% and 9% respectively, results were hit by lower average prices which reflected weaker market conditions. Kenmare shipped 294,100 tonnes of products in the first half, compared with 321,500 tonnes last year, as a result of a weak first quarter primarily because stocks had been sold down to a minimum level at the end of the year. Also, since production was modest in the first two months of 2013, stocks took some time to replenish. In contrast, 245,600 tonnes were shipped in the second quarter.As the company works to control operating costs, conserve cash and de-risk the business, the second half is expected to show strong growth. In August, the group and the union Sindicato Nacional dos Trabalhadores da Industria de Construcao Civil, Madeira e Minas de Mocambique (SINTICIM) which represents the mine's unionised workforce reached an agreement on remuneration for the next three years which provides the company with a stable basis for management of a key component of operating costs.The 50% capacity expansion of all main production facilities is now complete and operational which is anticipated to boost production in the next six months. "Whilst demand has been subdued due to de-stocking and to generally reduced growth in many major markets, as the de-stocking cycle completes and large economies such as the US move towards more normal growth patterns, demand will improve," the group said."Given the largely fixed cost base, the increase in production from the expanded plant will drive down the unit operating costs. When the market strengthens and delivers improvements in price, increasing production will generate significant free cash flow from operations. During current market weakness, the company will continue to focus on production ramp-up and cost control to maintain liquidity."RD