Arrium is preparing to announce bigger falls in profit and more write-downs

Image: Paula Bronstein / Getty Images.

Arrium is preparing to announce more falls in profits and bigger write-downs as it restructures, trying to bring down its costs to meet flagging iron ore prices.

The miner today announced it expected to record a further asset impairment charge of about $320 million for the year to the end of June.

This includes $245 million in mining, $45 million related to lower margins in recycling and $30 million related to Metalcentre, which is part of its retail business.

This is on top of $1.3 billion in write-downs announced in January, mainly due to the mothballing of its Southern Iron mine.

Iron ore miners have been been cutting costs as the price of the commodity falls by more than half in less than a year.

However, a slight recovery in prices in recent months has brought relief to some small producers. Atlas Iron recently shelved plans to mothball its mines.

Arrium says it has made progress redesigning its mining business for a low iron ore price environment.

Arrium has a target of $US50 a tonne cost for the 2016 financial year which, at current prices and exchange rates, would deliver a $16 a tonne margin.

CEO Andrew Roberts says significant progress has been made in reducing costs. The company is on track for annualised cost savings of $60 million to $90 million.

Arrium is forecasting earnings for the current financial year between $335 million and $350 million, below previous forecasts.

Debt is expected to be between $1.75 billion and $1.85 billion.

Arrium shares are trading more than 3% down to $0.155.

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