Arrium records $1.5b loss on iron ore writedown
Arrium has recorded a massive $1.5 billion first-half loss, after writing down asset values due to the plunging iron ore price.
The writedowns included $1.34 billion announced last month, plus $70 million of lost tax assets after the mining tax was repealed and $66 million in additional tax, restructuring and other adjustments.
Excluding these one-off writedowns, Arrium still posted an underlying loss of $22 million, down from a profit of $201 million in the same six-month period a year earlier.
The company's managing director said the poor result was due to a slump in iron ore and steel prices.
"External factors, including the sharp and substantial fall in iron ore prices, as well as historic low South-East Asian steel margins, made the half a very challenging one," he noted in the report.
Arrium said there was around a 40 per cent decline in the average market price for iron ore during the period compared to the same time a year ago.
The company said the average price it got for its ore over the half was $US68 per dry metric tonne, down 46 per cent from a year earlier.
It said its cost of production was down 8 per cent to $45.70 per wet metric tonne at the point the ore was loaded, which would be just under $US36, but then the ore has to be shipped and dried meaning the all-in cost is higher.
As part of the company's plan to further cut its cost of production to $37 per wet metric tonne by financial year 2016, the firm is mothballing its Southern Iron operation and will export around 9 million tonnes per annum from the Middleback Ranges, down from more than 12 million tonnes currently.
Arrium will cut its capital spending by $200 million, or 30 per cent, over the next three financial years.
The company also said recent falls in the Australian dollar will assist its viability, with underlying earnings expected to improve in the current half year compared to the first half.
"We have significant earnings and cash leverage to the recent significant fall in the Australian dollar and expect this to be
realised in the second half," Mr Roberts said.
"Earnings in steel and mining consumables are expected to be stronger, and we expect to benefit from the timing of our cost reduction program, which is weighted to the second half."
Unlike last year, when it announced a 6 cent interim dividend, Arrium said it will be making no payments to shareholders this half.
The bad news was largely expected, so Arrium shares were down 1.1 per cent at 21.75 cents by 2:13pm (AEDT).
