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Ft Minr | LSE:MINR | London | Exchange Traded Fund |
Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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0.00 | 0.00% | 1,633.60 | 1,619.60 | 1,638.00 | 0 | 08:53:47 |
RNS No 4122j MINORCO S.A. 3rd September 1998 MINORCO ANNOUNCES INTERIM RESULTS THE HALF YEAR IN BRIEF - Significantly lower metals, methanol and fertiliser prices resulted in a 26% fall in operating earnings to US$303 million. - Net earnings fell by 38% to US$123 million. - First copper produced from Collahuasi mine in July. - Disposal of carbon black business in Brazil. - Interim dividend maintained at 22 US cents per share. Highlights for the six months to June 30, 1998 Unaudited 6 months to June 30 US$ millions except per share amounts 1998 1997 Sales 3,262 3,078 Operating earnings 303 407 Earnings before exceptional items, tax and minority interests 271 409 Net earnings 123 199 Net earnings per share* (US$) 0.55 0.88 Dividends declared per share (US$) 0.22 0.22 * Both basic and diluted Overview of Results The prices of almost all of the commodities to which Minorco has a significant price exposure, most importantly copper, ammonia fertilisers and methanol, were very weak during the first half of 1998 following their collapse in the latter part of 1997. All operations continued their drive to improve productivity with the gold and base metals segments, in particular, successfully achieving significant cost reductions. Minorco's agribusiness subsidiary, Terra, was particularly affected by lower prices with a 45% fall in its operating earnings. Overall, Minorco's operating earnings for the first half of 1998 were 26% lower at US$303 million. Increased net financial expense arising from the continuing funding of Minorco's mining projects and the acquisitions made in the prior year further reduced earnings. As a result, net earnings were 38% lower at US$123 million compared with the first half of 1997. The liberalisation of Brazil's economy has meant that the Copebras industrial interests will require significant investment in new technology to compete with foreign competitors. As a consequence, it has been decided to divest Copebras' carbon black business and to joint venture its phosphate-based industrial interests with a global partner. Subject to completion, which is scheduled in the third quarter, Minorco will record in the second half of 1998 an exceptional gain of approximately US$140 million arising from the carbon black sale. The next quarter will see the achievement of commercial production at the massive Collahuasi copper project in Chile and the Cerro Vanguardia gold project in Argentina. Both these projects will be completed very close to their original timetable and budget. Gold: Minorco's gold operations earned US$23 million compared with US$19 million in the first half of 1997. Increased production and a significant reduction in operating costs more than compensated for a 15% fall in the average realised price of gold, which reduced revenues by US$19 million. Gold traded in a relatively narrow range from US$278 to US$314 per ounce during the six months. The average realised gold price of US$305 per ounce compared with a prior period average of US$360 per ounce. Attributable gold production of 464,000 ounces was 70,000 ounces higher than in 1997, the largest increase being at the Jerritt Canyon and Pikes Peak mines. At Jerritt Canyon, mining was centred on the higher grade Burns Basin open pit and the Murray underground mine. At Morro Velho, although production was unchanged at 107,000 ounces, significant benefits continue to be achieved from lowering costs. During the six months, the Corrego do Sitio open pit mine was depleted and the Raposos underground mine put on a care and maintenance basis. This continues the strategy of concentrating production at the low cost Cuiaba mine. At Cerro Vanguardia, the mining and stockpiling of ore and removal of waste continues ahead of programme. Commissioning of the crushing plant, stacker blender system and raw water supply system has been completed and mechanical and electrical installation of the process plant facilities is nearing completion. First gold production is planned during September. Discussions continue with third parties regarding the possible sale of our gold assets. Minorco currently expects to reach a decision by the year end. Base metals: Base metals contributed US$31 million to operating earnings compared with US$73 million in the first half of 1997. Despite falling LME stocks, the copper price remained depressed throughout the six months, averaging 78 US cents per pound. The average realised price fell to 82 US cents per pound compared with 115 US cents per pound in 1997 costing the base metals segment US$60 million in operating earnings. Higher production and the benefit of operating efficiencies at both Hudson Bay and Mantos Blancos partly mitigated the effect of the lower price. Attributable copper production increased by 10% to 92,000 tonnes. Zinc production of 47,000 tonnes was 12% higher than in 1997 with the average realised price of 56 US cents per pound being 4 US cents per pound lower than in the first half of 1997. Nickel production in Brazil increased marginally to 4,700 tonnes but operations were affected by a 27% fall in the nickel price to an average of US$2.47 per pound. At the current depressed level of nickel prices, production from the smaller Morro do Niquel mine is no longer economic and the decision has been taken to close the operation. At Collahuasi, construction and pre-stripping were virtually completed by the end of June. Crushing of oxide ore and the agglomeration and stacking of material for leaching started in April. The oxide plant was completed and the first copper cathodes produced in July. The first two lines of the concentrator plant to treat the sulphide ore should be completed and concentrate production commence in the third quarter. At the Loma de Niquel project in Venezuela, engineering and procurement are now well advanced. Construction of the access road and dam construction at the mine site started in the first half of the year, as did the installation of the concrete foundations for the furnaces and other processing facilities. At the Lisheen zinc and lead mine in Ireland, work commenced in January on developing the decline which will provide access to the orebody. Good advance rates in the early stages have been tempered by slower progress recently in difficult ground conditions. Sinking the concrete-lined fresh air shaft is proceeding well. The metallurgical treatment plant, infrastructure and tailings management facility are progressing to schedule. Industrial minerals: The industrial minerals segment increased operating earnings by 11% to US$66 million. The major contributor was again the European Industrial Minerals Division (IMD). The UK business benefited from the continuing synergies of the Tilcon and subsequent acquisitions, from further reductions to the cost base of the division and relatively firm prices for most of its products. In Germany, demand for construction materials continued to be very depressed within the Berlin / Dresden / Leipzig triangle which Minorco's operations serve. Given the market conditions, results were satisfactory due to a continuing emphasis on rationalisation and cost reduction. Some improvement in profitability occurred in Spain, with aggregates volumes and concrete prices somewhat improved. IMD completed three acquisitions during the six months. Tilcon Scotland expanded into south west Scotland with the acquisition of the Baird and Stevenson sand and gravel, concrete and coated stone business. Tilcon South materially strengthened its position in the North Wales / Manchester area with the purchase of Bodfari quarries, a producer of sand, gravel, concrete, coated stone and, most significantly, limestone. The purchase from Johnson Matthey of UK Minerals, a minerals trading and processing business, further strengthened the division. IMD has now completed 17 acquisitions, involving an investment of more than US$100 million, since the Tilcon acquisition at the end of 1995. Cleveland Potash's earnings were lower than in the prior period reflecting lower sales of potash and salt. Salt sales, in particular, were adversely affected by the mild winter in the UK. Copebras' earnings were well above the prior period. While prices for carbon black were marginally lower than in the first six months of 1997, this was more than offset by higher sales volumes, reflecting strong demand from the domestic tyre sector and higher exports, and by lower costs at the operation. By June, the co-generation plant, which was installed to reduce power costs, was supplying all the energy consumed in the plant. Paper and packaging: The paper and packaging segment contributed US$67 million compared with US$44 million in the first half of 1997. While the most significant contributor to the increase was Swiecie, the largest pulp and paper producer in Poland, purchased in the second half of last year, all operations in the segment showed improvements over the prior period. Swiecie's contribution was in line with management's expectations at the time of its acquisition. Neusiedler turned in a strong performance for the first six months, as did Frantschach Packaging and Aylesford. Pols' earnings were also ahead of the prior year benefiting from higher pulp prices, but the contribution from Aracruz declined mainly because of lower interest income. The mill modernisation programme achieved nominal capacity in June and priority will be given to cost optimisation. Pulp and paper markets are increasingly coming under pressure due to the consequences of lower demand in South East Asia. Agribusiness: Minorco's agribusiness subsidiary, Terra, contributed US$116 million compared with US$211 million in the first half of 1997. Operating earnings were adversely impacted by lower prices for both nitrogen fertilisers and methanol. Drastically reduced demand from China combined with increased capacity in the industry forced the price of nitrogen fertiliser lower with the price of liquid solutions, of which Terra is a major producer, 26% lower than in the comparable period last year. The methanol price averaged 37 US cents per gallon compared with 58 US cents per gallon in the first half of 1997. This reduction resulted from a combination of lower overall demand, MTBE plant shut-downs in the USA and higher world production. The price of methanol has continued to weaken and currently languishes below 30 US cents per gallon. Earnings from investments Earnings from investments increased marginally to US$50 million. Improved earnings from Engelhard were offset by lower results from Aracruz and the currently loss-making Colombian coal interests. Engelhard's net earnings for the six months increased by 15% to US$94 million. The Catalyst and Chemicals segment performed well, led by petroleum catalysts and environmental technologies and the segment's results also benefited from the first two months' contribution from the chemical catalyst business of Mallinckrodt, which was purchased for US$210 million in May. Operating earnings from the Engineered Materials and Industrial Commodities Management segment jumped 78% aided by increased volumes and volatility in platinum group metals and improved results from engineered materials. Accounting change In 1998, Minorco adopted the revised standard on accounting for deferred tax issued by the International Accounting Standards Committee. The provision for deferred tax is now calculated on a full liability basis, irrespective of when the taxes become payable, rather than, as in the past, the partial liability basis, which accrued taxes payable within the foreseeable future. The comparative figures for the first six months of 1997 and the full year have been restated to the same basis. Liquidity and financial position Net cash provided by operating activities fell by US$313 million to US$146 million. This was the result of lower earnings and a higher level of receivables at Terra due to a delayed planting season. Capital expenditure increased to US$461 million from US$386 million reflecting primarily Minorco's ongoing commitment to Collahuasi and the start of construction at Lisheen and Loma de Niquel. At June 30, 1998, cash and short term investments amounted to US$1,935 million while loans and short term debt amounted to US$3,745 million of which US$1,234 million is non-recourse to Minorco and relates principally to Terra and the paper and packaging companies. The ratio of net debt to total capital was 28% compared to 22% at the end of 1997. Outlook Since the beginning of the year, little progress appears to have been made in the Japanese and other Asian economies to reverse their slide into recession. The severe impact of this crisis on commodity prices has in turn further weakened those countries such as Russia which are heavily dependent on exports of raw materials. The requirement for appropriate economic policy responses to this crisis is now even more critical than at the beginning of the year. Clearly it is highly unlikely that the second half of the current year will benefit from any significantly stronger price environment. While we will continue to strive to improve operating efficiencies to counter the pressure which low prices are putting on margins, it is anticipated that earnings before exceptional items in the second half of the year will be lower than in the first half, not least because of the normal seasonality of Terra's earnings. The interim dividend has been maintained at the prior year's level and while it would be the intention to maintain dividends through a downturn in the commodity cycle, this will need to be kept under review depending on developments in the world economy. Contacts: Nick von Schirnding VP Investor and Corporate Affairs +27 11 638 3211 Carina Corbett Corporate Affairs Manager +44 171 404 2060 CONSOLIDATED STATEMENT OF EARNINGS Unaudited 6 months ended Year ended June 30 December 31 US$ millions Note 1998 1997 1997 Sales 3 3,261.8 3,078.4 5,662.0 Operating earnings 3 & 4 302.9 406.8 660.7 Net corporate costs 5 (82.3) (47.3) (133.4) Share of earnings of investments accounted for by the equity method 50.5 49.4 88.6 Earnings before exceptional items, taxation and minority interests 271.1 408.9 615.9 Exceptional items - - 48.0 Earnings before taxation 271.1 408.9 663.9 Taxation (81.7) (121.4) (218.8) Earnings after taxation 189.4 287.5 445.1 Earnings attributable to minority interests in subsidiary companies (66.4) (88.9) (182.5) Net earnings 123.0 198.6 262.6 Net earnings before exceptional items 6 123.0 198.6 318.9 Earnings per share (basic and diluted)(US$): Net earnings 0.55 0.88 1.17 Net earnings before exceptional items 0.55 0.88 1.42 Interim dividend An interim dividend of 22 US cents per share has been declared in respect of the year to December 31, 1998 payable on October 22, 1998 to shareholders registered in the books of Minorco at the close of business on September 18, 1998 and to persons presenting coupon no. 22 detached from bearer share certificates. Shareholders resident in the United Kingdom who do not elect, by notifying the United Kingdom transfer agents by October 1, 1998, to receive their dividend in US dollars will receive their dividend in sterling converted at the rate applicable on October 6, 1998 less appropriate taxes. Dividend warrants will be posted from the transfer agents on October 21, 1998. The dividend is payable subject to conditions which can be inspected at the offices of the transfer agents. CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited June 30 December 31 US$ millions 1998 1997 1997 Fixed assets: Intangible assets 358.0 289.4 321.8 Deferred tax assets 63.9 52.7 40.5 Tangible assets 5,363.0 4,199.4 5,084.5 Financial assets 860.8 811.3 845.9 6,645.7 5,352.8 6,292.7 Current assets: Stocks 787.0 799.3 815.3 Debtors 1,233.9 1,183.7 733.6 Short term investments 1,343.7 1,330.7 1,012.5 Cash and cash equivalents 591.4 538.2 874.9 3,956.0 3,851.9 3,436.3 Short term debt (734.5) (508.4) (372.9) Current liabilities (1,239.4) (1,168.0) (995.9) Net current assets 1,982.1 2,175.5 2,067.5 Capital employed 8,627.8 7,528.3 8,360.2 Long term liabilities (3,010.1) (2,447.3) (2,806.7) Deferred tax liabilities (430.8) (313.9) (415.2) Provisions for liabilities and charges (457.4) (462.6) (466.3) Minority interests in subsidiary companies (1,198.2) (785.0) (1,173.4) Shareholders' investment 3,531.3 3,519.5 3,498.6 Capital and reserves: Subscribed capital 315.9 315.8 315.9 Reserves 1,524.5 1,524.1 1,524.5 Cumulative translation adjustment (118.8) (86.4) (122.8) Retained earnings 1,809.7 1,766.0 1,781.0 Shareholders' equity 3,531.3 3,519.5 3,498.6 CONSOLIDATED STATEMENT OF CASH FLOW Unaudited 6 months ended Year ended June 30 December 31 US$ millions 1998 1997 1997 Cash flow from operating activities Earnings before exceptional items, taxation and minority interests 271.1 408.9 615.9 Adjustments for non-cash movements 140.5 103.7 239.5 Adjustments for financial income and expense 82.6 4.1 39.6 Operating cash flow before re-investment in working capital 494.2 516.7 895.0 Changes in net current asset components: Stocks 25.7 96.3 114.7 Debtors (505.2) (349.2) 71.3 Creditors 228.8 254.0 47.4 Cash generated from operations 243.5 517.8 1,128.4 Interest paid (116.6) (84.1) (191.5) Dividends received 15.7 13.0 23.6 Other financial income 41.5 74.3 161.5 Taxes paid (31.1) (62.8) (62.2) Restructuring and reclamation payments (7.4) - (26.5) Net cash provided by operating activities 145.6 458.2 1,033.3 Cash flow from investing activities Acquisition of subsidiaries and joint ventures (123.9) (40.2) (536.3) Acquisition of financial assets (6.6) (15.6) (94.7) Capital expenditure on tangible assets (461.2) (386.0) (985.5) Proceeds from disposal of tangible assets 8.7 9.9 25.3 Proceeds from disposal of financial assets 28.8 7.9 15.1 Net cash used in investment activities (554.2) (424.0) (1,576.1) Cash flow from financing activities Dividends paid to Minorco shareholders (94.3) (94.3) (143.7) Dividends paid to minority shareholders (14.0) (36.6) (42.6) Long term loans received 207.2 62.0 462.6 Short term loans received/(repaid) 357.5 (16.6) (138.6) (Increase)/decrease in short term investments (331.3) 37.3 355.6 Share capital issued by subsidiaries to minority shareholders - 2.6 255.1 Share buy-back by Terra Industries Inc. - (47.0) (22.4) Insurance proceeds received by Terra Industries Inc. - - 95.1 Net cash from/(used in) financing activities 125.1 (92.6) 821.1 (Decrease)/increase in cash and cash equivalents (283.5) (58.4) 278.3 Cash and cash equivalents at beginning of period 874.9 596.6 596.6 Cash and cash equivalents at end of period 591.4 538.2 874.9 Cash and cash equivalents 591.4 538.2 874.9 Short term investments 1,343.7 1,330.7 1,012.5 Liquid assets 1,935.1 1,868.9 1,887.4 Notes 1. Accounting Standards The financial statements are prepared in accordance with International Accounting Standards. 2. Restatement of prior periods Effective January 1, 1998, Minorco has adopted the revised International Accounting Standard (IAS) 12 - Income Taxes. Under the revised IAS 12, deferred taxation must be calculated on a full liability method. In prior periods Minorco calculated its deferred taxation under the partial liability method. The comparatives included in this release have been restated to reflect revised IAS 12 as follows: Retained earnings Reported Adjustment Restated Balance as at December 31, 1996 1,748.1 (85.9) 1,662.2 Net earnings for the year 304.7 (42.1) 262.6 Dividends paid and transfer to legal reserves (143.8) - (143.8) Balance as at December 31, 1997 1,909.0 (128.0) 1,781.0 3. Sales and operating earnings Sales Operating earnings By business segment 6 months ended Year ended 6 months ended Year ended June 30 December 31 June 30 December 31 1998 1997 1997 1998 1997 1997 Gold 123.6 130.6 279.8 22.6 19.3 42.8 Base metals 345.2 399.4 759.2 31.5 73.4 111.9 Industrial minerals 508.6 500.3 1,040.3 65.6 59.3 131.9 Paper and packaging 559.5 428.0 1,041.6 67.3 44.2 103.2 Agribusiness1 1,724.9 1,620.1 2,541.1 115.9 210.6 270.9 3,261.8 3,078.4 5,662.0 302.9 406.8 660.7 By geographical segment Europe 1,108.9 818.8 1,848.8 122.9 94.1 205.2 North America 1,825.4 1,863.1 3,045.3 133.5 231.8 317.9 South America 327.5 396.5 767.9 46.5 80.9 137.6 3,261.8 3,078.4 5,662.0 302.9 406.8 660.7 1 Because of the seasonal nature of the agribusiness segment and the effects of weather-related conditions in several of its marketing areas, results of operations for the half year should not be considered indicative of the results for a full year. 4. Operating earnings 6 months ended Year ended June 30 December 31 1998 1997 1997 Sales 3,261.8 3,078.4 5,662.0 Cost of sales (2,666.0) (2,376.4) (4,371.9) Gross operating earnings 595.8 702.0 1,290.1 Selling, administration and other expenses (292.9) (295.2) (629.4) 302.9 406.8 660.7 5. Net corporate costs 6 months ended Year ended June 30 December 31 1998 1997 1997 Interest and other financial income 68.5 78.7 154.1 Foreign currency gains 0.1 - 0.8 Dividend income from cost accounted investments 4.0 1.0 2.2 Interest expense (104.7) (84.3) (190.8) Net financial expense (32.1) (4.6) (33.7) Corporate costs (23.2) (21.8) (49.2) Exploration (27.0) (20.9) (50.5) (82.3) (47.3) (133.4) 6. Net earnings before exceptional items 6 months ended Year ended June 30 December 31 1998 1997 1997 Net earnings 123.0 198.6 262.6 Adjustment for exceptional items: Equity investments - - 46.4 Other gains - - (94.4) Exceptional items - - (48.0) Taxation - - 71.5 Minority interest - - 32.8 123.0 198.6 318.9 7. Reconciliation of Terra's operating earnings 6 months ended Year ended June 30 December 31 1998 1997 1997 Terra's US GAAP operating earnings 106.5 204.1 253.3 Elimination of goodwill amortised through the earnings statement 12.3 9.7 24.6 Other items (2.9) (3.2) (7.0) 115.9 210.6 270.9 PRODUCTION For the six months ended June 30 Product Operation Production 1 Precious metals 1998 1997 Gold (troy ounces) Jerritt Canyon 122,600 88,500 Pikes Peak 111,300 101,900 Morro Velho 106,600 107,300 Serra Grande 70,100 63,800 Hudson Bay 53,300 32,000 463,900 393,500 Silver (troy ounces) Hudson Bay 517,500 366,000 Mantos Blancos 681,800 661,000 1,199,300 1,027,000 Base metals Copper (tonnes) Hudson Bay 2 24,400 19,300 Mantos Blancos 67,900 64,800 92,300 84,100 Zinc (tonnes) Hudson Bay 2 46,800 41,800 Nickel (tonnes) Codemin 3,500 3,300 Morro do Niquel 1,200 1,300 4,700 4,600 Niobium (tonnes) Catalao 1,200 1,200 1 Includes entire output of controlled entities and the Group's proportion of joint ventures where applicable. 2 At Hudson Bay, 20,000 tonnes of copper (1997: 16,500 tonnes) and 2,600 tonnes of zinc (1997: 5,900 tonnes) were processed in addition to that sourced from its own production. PRODUCTION For the six months ended June 30 Product Operation Production 1 Industrial minerals 1998 1997 Crushed rock ('000 tonnes) UK ) Germany ) 7,123 6,139 Spain ) Sand and gravel2 ('000 tonnes) UK ) Germany ) 6,027 4,783 Spain ) Lime products ('000 tonnes) UK 489 458 Coated stone ('000 tonnes) UK 886 765 Ready-mixed concrete ('000m3) UK ) 1,129 1,192 Spain ) Potash ('000 tonnes)Cleveland Potash 506 474 Salt ('000 tonnes) Cleveland Potash 139 323 Carbon black ('000 tonnes) Copebras 79 75 Sodium tripolyphosphate ('000 tonnes) Copebras 32 30 Phosphate fertilisers ('000 tonnes) Copebras 274 279 Paper and packaging3 Paper ('000 tonnes) Frantschach ) 168 193 Neusiedler ) Sacks (millions) Frantschach 285 183 Newsprint ('000 tonnes) Aylesford 93 85 Pulp (\'000 tonnes) Pols 70 63 Agribusiness Ammonia ('000 tons) Terra 1,776 1,442 Liquid solutions ('000 tons) Terra 1,865 1,715 Methanol (million gallons) Terra 142 144 1 Includes entire output of controlled entities and the Group's proportion of joint ventures where applicable. 2 Excludes production used in the manufacture of ready-mixed concrete. 3 Held through 60%-owned subsidiary, Mondi Minorco Paper S.A. END IR FLGGLLZRLRMM
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