Natural resources company Eurasian Natural Resources Corp. Plc (ENRC.L) said Thursday in an interim management statement that high-carbon ferrochrome and iron ore production in the third quarter had recovered to pre-financial crisis levels. The company added that the second-half revenue will reflect higher sales volumes and prices, partially offset by a rise in costs from improved production volumes and some cost increases. Eurasian also cautioned that industry outlook into 2010 remains uncertain, as it sees further volatility in volumes and prices.
Revenues for the first nine months were substantially reduced compared to the prior-year period, impacted negatively by lower prices and sales volumes. However, sales volumes for the period exceeded the company's expectations held at the beginning of the year, due to a stronger than anticipated recovery in activity. Eurasian noted that revenues for the third quarter benefited from both higher prices and volumes, compared with the second quarter.
Segment-wise, revenues from Ferroalloys division declined substantially for the nine months from the comparable period, reflecting lower sales volumes and realised prices and a higher proportion of spot sales. Average ferroalloy prices in the first nine months of 2009 decreased 56% from the prior year. Production for the period was much lower than in the comparable period, reflecting production cutbacks announced in the fourth quarter last year. Eurasian, however said production from Ferroalloys Division increased progressively and is in line with the company's guidance.
In the Iron Ore division, revenues from iron ore concentrate sales saw a significant decline, although pellet revenues dropped, reflecting lower demand for the higher-priced product. Production for the nine months was substantially below that of the comparable period, reflecting production cutbacks of 50% announced in the fourth quarter last year, although sales volumes were better than initially expected.
In the Alumina and Aluminium division, revenues for the period dropped substantially, due to a 45% decline in the London Metal Exchange average price for aluminium compared with last year. Alumina production volumes for the nine months were steady on the comparable period, and with an increase in the proportion feeding the division's own aluminium production.
Energy division third-party revenue for the nine-month period showed a moderate decline compared to the previous year. In the Logistics division, third-party revenue was adversely affected by lower volumes of shipments and railway line repairs.
On September 18, Eurasian announced a recommended £584 million cash offer for Central African Mining & Exploration Company Plc, and on November 10, Eurasian informed that it had reduced the minimum acceptance condition as set out in the offer document to 85% from 90%, and declared the offer unconditional in all respects.
Looking ahead, for the full year, Eurasian said it anticipates businesses in Kazakhstan and Tuoli for the second half to run at about capacity, in line with guidance given at the half-year results. For the full year, capital expenditure expected to total US$1.2 billion.
Additionally, the company said group production volumes for full year 2010 are planned to be close to those of 2008, with additional volume from Tuoli, the aluminium smelter rising towards its full increased capacity and with a modest first-time copper/cobalt contribution from Central African Mining & Exploration Company.
ENRC is currently trading at 899.00 pence per share, down 2.55%, on the London Stock Exchange.
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