Kazakhamys hit with impairment charge on ENRC holding

Kazakh copper miner Kazakhamys was hit with a 2.2bn dollar impairment charge on its holding in ENRC, the group's audited results for the year ended December 31st have shown.

Kazakh copper miner Kazakhamys was hit with a 2.2bn dollar impairment charge on its holding in ENRC, the group's audited results for the year ended December 31st have shown.

The group said that ENRC - a diversified natural resources group in which it holds a 26% stake - experienced sharp declines in pricing for its major products, iron ore and ferrochrome in 2012.

Group earnings before interest, tax, depreciation and amortisation (EBITDA - a widely used measure of a company's operating profit) excluding special items was valued at $1.9bn for the year, which the group said reflected lower commodity prices, rising industry costs and lower sales volumes of copper products.

Some $1.4bn was recorded from own operations, joint venture and discontinued operations while a $548m contribution was posted from ENRC.

Segmental EBITDA was 30% below the prior year as revenues fell by 6.0% and a combination of salary inflation, higher transportation costs and greater volumes of material processed resulted in cash operating costs rising by 26% at the group's Mining Division.

With regard to the impairment charge of $2.2bn on its stake in ENRC, Kazakhmys said that the carrying value reduced to $2.0bn, equivalent to 375p per share and the holding had a market value of $1.4bn as of March 25th 2013.

Underlying profit for the year was worth $492m and the group said that this was impacted by a charge for disability benefits obligation of $207m. It included a $127m contribution from ENRC and there was an earnings per share of $0.94 based on underlying profit.

Net debt stood at $707m and the group said that it had long-term funding of $4.2bn in place for delivery of major projects and secured a new corporate debt facility to provide reserve liquidity during the development phase of major projects.

A full year dividend of 11.0 cents per share was recorded and the group said the dividend was reduced to reflect lower profitability in keeping with flexible dividend policy.

CFO: Kazakhamys in an "excellent position" to continue delivery of growth prospectsMatthew Hird, Chief Financial Officer of Kazakhamys, commented: "Debt will increase in the next couple of years as we invest in our new projects, but with $4.2bn of secured long-term funding, we are in an excellent position to continue the delivery of our growth projects."

He added: "Cost management will be a key focus in 2013 as we seek to improve cash flow from our core business and reduce the impact of rising industry costs."

Kazakhamys' share price was down 9.85% to 399.90p at 08:19 on Tuesday.

MF

Recommended

Share tips of the week – 30 September
Share tips

Share tips of the week – 30 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
30 Sep 2022
The best British tech stocks from a thriving sector
Share tips

The best British tech stocks from a thriving sector

Move over, Silicon Valley. Over the past two decades the UK has become one of the main global hubs for tech start-ups. Matthew Partridge explains why,…
29 Sep 2022
These 3 top value stocks offer
Share tips

These 3 top value stocks offer

Professional investor Adam Rackley of Cape Wrath Capital highlights three overlooked value stocks to buy.
29 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022

Most Popular

What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022
Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?
Budget

Mini-Budget: will Kwasi Kwarteng’s gamble on growth work?

The government has launched the biggest dash for growth in 50 years, relaunching an approach known as supply-side economics. What is the plan – and wi…
30 Sep 2022