27th Feb 2014 09:34
LONDON (Alliance News) - Kazakhmys PLC Thursday said it swung to a pretax loss in 2013 but the company's fall in revenues and EBITDA were less severe than analyst expectations.
Meanwhile, Chief Executive Oleg Novachuk said the Kazakhstan-based miner is considering a broader restructuring programme.
Kazakhmys posted a pretax loss of USD681 million for the full year 2013 from a pretax profit of USD151 million in the previous year as revenues fell 7.5% to USD3.10 billion from USD3.35 billion in 2012.
The company also announced that its segmental earnings before interest, taxation, depreciation and amortisation, which includes earnings from its now-sold German MKM GmbH and excludes a range of special items, fell to USD873 million from USD1.36 billion in 2012.
The company was expected to announce lower revenues and EBITDA in its full year 2013 figures. However, according to analyst consensus figures provided by Kazakhmys, revenue was expected to decrease 11% for the company to USD2.99 billion from USD3.35 billion in 2012, and its EBITDA was expected to fall to USD772 million, so the firm exceeded those expectations.
Revenues fell primarily due to increased production being offset by falls in commodity prices, and EBITDA fell due to ongoing restructuring, with major disposals and, in particular, a fall in earnings from its Kazakhmys Mining operations to USD705 million from USD1.16 billion.
Kazakhmys also said its cost of sales increased to USD2.11 billion from USD2.02 billion but that in the second half operating costs were below the comparative period in 2012 and the first half of 2013, reflecting the benefits of the firm's ongoing optimisation programme and asset review.
The company said tight operational control resulted in production, sales volumes and costs all being ahead of target, greatly assisting cash flow, which will remain a key focus in 2014.
As part of the company's ongoing restructuring, Novachuk said the company is considering a broader restructuring programme which he expects would "create a better positioned and more cash generative group, moving the company towards our objective of output dominated by large scale, low cost, open pit mines."
Shares of the FTSE 250 copper-focused miner, which operates in Kazakhstan and elsewhere in Central Asia, was recently lifted by a 20% devaluation of the Kazakhstan currency, the tenge, as 60% of Kazakhmys's costs are generated in the country.
In a Deutsche Bank research note earlier this week, analysts said the company would have been loss making in 2014, and the devaluation provides some earnings reprieve as costs in US dollar terms reduce.
In response to the devaluation, Kazakhmys said in February that it will raise the salaries of its operational staff in Kazakhstan by up to 10% from April 1 to protect them from some of the impact of recent devaluation.
Kazakhmys announced In January that its production across most of its portfolio met or beat its previous guidance in its full year 2013.
The company said at the time that its own copper cathode production slightly increased to 294,000 tonnes for 2013 from 292,200 tonnes in 2012, at the top end of company guidance, while it achieved a higher average copper grade of 0.99% for 2013, from 0.95% the previous year, and increased its extraction rate by 4.3% to 39.2 million tonnes from 37.5 million tonnes.
Kazakhmys added that its silver output increased 12% to 14.3 million ounces for the full year from 12.6 million ounces in 2012, a rate above the company's full-year targets due to higher recovery rates and its total gold output for the full year was above estimates at 107,500 ounces, a 17% fall on 2012 due to lower grades, a build up of ore at its Karagaily concentrator and a slight increase in work in progress at its Balkhash smelter at the end of 2013.
The company said on Thursday that its copper output is expected to be in line with 2013 guidance of 285,000 to 295,000 tonnes.
Kazakhmys shares were up 20% to 267.17 pence, making it the top FTSE 250 riser Thursday morning. The stock touched an intraday high of 297.40 pence following its announcement.
By Tom McIvor; [email protected]; @TomMcIvor1
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