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Kumba says profits may drop by 30%

17 Jan 2013

SA's largest iron ore company‚ Kumba Iron Ore warned on Wednesday (16 January) that its profits for the year to December would fall by about 30% because of lower prices and production losses caused by a wildcat strike.

Kumba‚ which is owned by Anglo American said its headline earnings per share would be between R36.30 and R38.80 compared with R53.13 a year earlier.

"The decrease in earnings is largely attributable to a decrease in export iron ore prices in the period and the impact on production following the illegal strike at Sishen Mine‚" Kumba said.

The iron ore price fell by 24% last year to US$130 a ton compared to US$170 in 2011‚ SBG Securities analyst‚ Heidi Sternberg‚ said.

If Chinese gross domestic product grows or Chinese steel production increases by 3% or more this should be positive for iron ore demand and prices for steel feedstock this year‚ she said in a note.

Iiron ore imports by China‚ the world's largest steel maker‚ had grown by nearly 11% in December to 70.9m tons as production improved. The iron ore price is currently around US$155 a ton. This is for ore with a 62% iron content.

Much like most major companies in South African mining‚ particularly platinum and gold‚ Kumba has suffered from lower production levels due to labour unrest that swept through the sector late last year.

Kumba's Sishen mine‚ the largest open pit operation in Africa‚ was brought to a halt in October when 300 workers embarked on an unprotected strike.

The workers seized heavy earthmoving equipment‚ threatening to damage it if their demands for higher wages were not met.

Kumba says it lost 2.2m tons in production of iron ore during the strike.

Source: I-Net Bridge

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