The Australian reported that mining and materials group Arrium has warned of continued softness in iron ore markets as it declared a loss of AUD 1.5 billion in the first half.
The weak numbers were driven by AUD 1.335 billion in impairments, which the company had previously flagged to the market due largely to plummeting ore prices. The commodity's price is seen unlikely to recover sharply soon.
We expect demand for seaborne iron ore to remain strong but prices in the second half to continue to be subject to the supply and demand balance and negative sentiment.
Mr Andrew Roberts MD of Arrium said that “The company had been hurt by market turbulence, but had performed well operationally. 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.”
Despite the heavy losses the company remained optimistic, telling shareholders the fall in the Australian dollar would be a major positive for the group in the second half.
Mr Roberts said that “We expect underlying earnings for FY15 to be weighted to the H2. 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. 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.”
(Source - The Australian, 18 Feb, 2015)
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