Wednesday, Antofagasta Plc (ANTO.L), one of the world's largest copper producers, reported a 15.3% rise in first-half pre-tax profit, as improved copper production and strong commodity prices offset an increase in production costs.
First-half profit before tax for the company whose activities are mainly centralized in Chile increased to US$1.66 billion from US$1.44 billion a year ago.
Net earnings reached US$792.8 million or 80.4 cents per basic share, up 8.8% from US$728.4 million or 73.9 cents per basic share in the first-half of 2007.
Total profit from operations came in at US$1.64 billion, an increase from US$1.39 billion in the previous year.
Half-yearly Group turnover grew 23.9% to US$2.41 billion from US$1.94 billion in the previous year.
Antofagasta said the results for the first six-month period were benefited from higher copper and molybdenum prices, lower tolling charges for copper concentrate and higher sales at the transport and water divisions. These factors offset the effect of higher operating costs as well as expected lower molybdenum production.
The company generated US$2.0 billion on the sale of copper concentrate and copper cathode in the first-half, a 32.2% increase over US$1.51 billion in the prior-year period. During the period, average realized copper price grew 20.8% to 409.4 cents per pound from 338.9 cents per pound a year earlier, mainly reflecting a 20% increase in the average LME copper at 367.8 cents per pound. The company said it expects the copper prices to remain strong well into 2009, despite a softening of prices in the seasonally weaker third quarter.
Antofagasta's total copper production reached 233,600 tonnes, 10% higher than a year ago, mainly reflecting increased throughput at Los Pelambres. Los Pelambres produced 163,800 tonnes of payable copper in the period, which was 15.5% above last year.
Copper sales volumes rose 6.7% to 228,500 tonnes this half year from 214,100 tonnes in the first six months of 2007.
As copper concentrates market remains in continued deficit, tolling charges were at levels favorable to producers. Tolling charges for copper concentrates at Los Pelambres declined 26.2% to US$66.9 million from US$90.7 million a year before, due to lower processing charges and the effect of nil price participation under the two-year brick system.
Revenue from molybdenum sales were US$267.3 million, lower than US$320.5 million generated in the previous year. Molybdenum prices averaged US$33.1 per pound, up 16.5% from US$28.4 per pound in the first half of last year. Molybdenum production, as expected by the company, decreased 22.4% to 3,800 tonnes at Los Pelambres as a result of lower molybdenum grades.
Further, Antofagasta said its transport and water divisions showed improved performance in the six-month period with transport tonnages maintained and water volumes increased in comparison with the half-year of a year earlier. Turnover from the transport division increased 32.4% to US$72.4 million.
Marcelo Awad, chief executive officer, commented, "This has been an excellent first half for the Group with improved copper production and prices resulting in increased earnings. Our operations have performed well and despite substantial continuing industry-wide cost pressures including fuel, energy and acid, production levels and costs across the Group remain in line with forecast."
In addition, Antofagasta declared an interim dividend of 6.4 cents per share, which includes ordinary interim dividend of 3.4 cents per share and a special dividend of 3.0 cents per share. The interim dividend will be paid on October 9 to ordinary shareholders on the register at the close of business on September 19.
Looking ahead to full-year 2008, the company said it expects to meet its planned copper and molybdenum production target of 463,000 tonnes and 6,800 tonnes respectively.
The company predicts copper prices to average over 360 cents per pound this year and to remain at a similar or higher level through 2009.
Marcelo Awad added, "Fundamentals for both the copper and molybdenum markets remain solid and we expect this to continue well into 2009. With our sound financial position, we continue to make good progress with the Group's plans for sustainable growth through both brownfield and greenfield projects as well as exploration in Chile and internationally, and this should result in further profitable volume growth from 2010 and beyond."
ANTO.L is currently trading on the LSE at 588 pence, up 18 pence or 3.16%, on a volume of 2.08 million shares.
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