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MMG reports US$35.9 million first half profit

28 Aug 2013 08:00 PMMedia Release

MMG Limited (MMG) (Stock Code 1208.HK) is pleased to report its financial results for the first half 2013.

Key points

  • 2013 first half revenue impacted by lower copper, zinc and gold prices.
  • Copper sales were higher in the first half 2013 due to the inclusion and ramp-up of Kinsevere, efficiency improvements at Sepon and the recently commissioned copper oxide open pit at Golden Grove. Zinc sales were lower due to declining zinc grades at Century.
  • Additional mining activity and corresponding mill throughput and production volumes resulted in higher total operating expenses in the first half 2013. MMG mined 41% more ore, compared to a 15% increase in operating expenses.
  • Timing of shipments and the drawdown of inventories impacted operating expenses and revenue resulting in EBITDA of US$302.2 million, a 25% decrease compared with the first half 2012.
  • Total profit for the first half was US$35.9 million, a 75% decrease compared with the first half 2012.
  • MMG continues to pursue permanent operating cost reductions in a weak commodity price environment.
  • Gearing ratio of 0.51 indicates MMG is well positioned to fund its existing commitments and future growth strategy.
  • Dugald River project financing was completed. A review of key project components is underway.
  • MMG has not declared a dividend for the period, however the Board remains committed to creating long-term shareholder value and will continue to evaluate future uses of surplus cash, including the payment of dividends to shareholders.

FINANCIAL HIGHLIGHTS
Six months ended 30 June

 2013
US$ million

 2012
US$ million

Change %

Revenue

 1,177.6

 1,218.7

 (3)

EBITDA

 302.2

 403.7

 (25)

EBIT

 93.0

 259.1

 (64)

Profit

 35.9

 144.5

 (75)

Net cash generated from operating activities

 201.3

 258.5

 (22)

Diluted earnings per share

 US 0.47 cents

 US 2.47 cents

 (81)

EBITA margin

 26%

 33%

 

Commentary from the Chief Executive Officer

SAFETY:

“Despite continuing improvements in our safety performance, we were greatly saddened by the loss of 29-year-old employee Mr Daola Phoumixay who was fatally injured at Sepon on 27 June. An independent investigation has been conducted and our Sepon operation is reviewing its processes to ensure this type of incident does not recur. I offer my sincere condolences to Daola’s family, friends and colleagues.

We continued our focus on safety with a total recordable injury frequency rate (TRIFR) for the first half of 2.7 per million hours worked compared with 3.0 at the end of 2012. Our lost time injury frequency rate (LTIFR) was 0.7, consistent with the rate at the end of 2012.

PERFORMANCE:

MMG delivered a profit in the first half 2013, despite weaker commodity prices. MMG mined a total of 8 million tonnes of ore, a 41% increase compared with 2012.

Total copper production increased 33% compared to 2012 due to productivity improvements at Sepon, the ramp-up of Kinsevere and the commissioning of our copper oxide open pit at Golden Grove.

Total revenue for the first half 2013 was US$1,177.6 million, a 3% decrease from the first half 2012.

Despite an increase in total copper sales, lower average realised prices and lower zinc and gold sales volumes contributed to the decrease in revenue when compared to the first half 2012.

MMG generated US$302.2 million in earnings before interest, taxes, depreciation and amortisation (EBITDA), a 25% decrease compared with the first half 2012.

The decrease in first half profit can be attributed to a 15% increase in MMG’s operating expenses compared with the first half 2012 due to changes to inventories relating to drawdown of stockpiles and the inclusion of Kinsevere following the acquisition of Anvil in February 2012.

Production-related costs were well managed and MMG has undertaken several initiatives to permanently reduce costs given our commitment to deliver long-term shareholder returns.

Examples of initiatives resulting in benefits in the first half 2013 include the transition of Sepon to an owner-operator mine (US$6.3 million reduction in contractor costs) and reduced costs at Golden Grove following the restructure in 2012 (US$7.5 million reduction in employee costs and US$3.8 million saving in consumable products).

Total profit for the first half was US$35.9 million, a 75% decrease compared with the first half 2012.

MMG reported a positive net cash flow of US$173.9 million for the first half 2013 which reflected increased investments to support the long-term growth strategy of the company. MMG’s gearing ratio, that is net debt divided by net debt plus total equity, was 0.51.

MARKETS AND OUTLOOK:

The first half 2013 saw the international minerals and metals sector experience increased volatility due to continuing concerns over global economic growth and long-term sustainable demand for commodities.

While London Metal Exchange (LME) copper and zinc prices were on average, 7% and 2% lower in the first half 2013 compared with 2012, LME prices of both commodities were significantly lower than their averages at the end of June 2013.

We continue to believe that continuing industrialisation in China and other developing economies will drive long-term copper demand growth.

The long-term outlook for zinc remains positive with the challenge for new mine supply to compensate for resource depletion and the needs of consumption growth.

I believe our company is well positioned for success with MMG’s strong leadership, growing portfolio of base metals assets and a solid long-term outlook on market fundamentals.”

Andrew Michelmore, Chief Executive Officer and Executive Director

 

Revenue

 EBITDA

Six months ended
30 June

2013
US$ million

2012
US$ million

Change
%

2013
US$ million

 2012
US$ million

Change
%

Sepon

378.4

429.9

(12)

211.6

264.7

(20)

Kinsevere (1)

216.8

96.6

124

92.8

44.9

107

Century

367.1

377.0

(3)

52.4 

104.4

(50)

Rosebery

106.2

150.0

(29)

29.2

58.1

(50)

Golden Grove

109.1

165.2

(34)

1.5

38.9

(96)

Other

-

-

-

(85.3)

(107.3)

 21

Total

1,177.6

1,218.7

(3)

302.2 

403.7

 (25)

(i) MMG acquired Kinsevere following the acquisition of Anvil in February 2012.

For further details on the 2013 interim results please refer to the full Interim Results Announcement.

Click here to download this media release as a pdf.

-Ends-

Media enquiries:

English language
Kathleen Kawecki   
Communications Advisor 
T +61 3 9288 0996   
M +61 400 481 868   
kathleen.kawecki@mmg.com

Chinese language
Christine Chan
T +852 2801 6090
M +852 6173 9039
E christine@corporatelink.com.hk  

Investor enquiries:

Colette Campbell
Group Manager Investor Relations
T +852 2216 9610 (Hong Kong)
T +61 3 9288 9165 (Australia)
M +61 422 963 652
E colette.campbell@mmg.com 

Maggie Qin
Senior Corporate Affairs Advisor
T +852 2216 9603 (Hong Kong)
T +61 3 9288 0818 (Australia)
M +61 411 465 468
E maggie.qin@mmg.com

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