Arrium posted a $1.9 billion full year loss as the miner writes down $1.799 billion in assets and adds restructuring costs in an attempt to reduce overheads in a low commodity price world.
The margins of small iron miners are being squeezed by slowing Chinese demand and increasing global supply as big miners, such as BHP and Rio, dig more ore to try to make up for falling revenue.
The fall in iron ore saw the average market price for Arrium down 40%. Sales fell 13% to $6.086 billion.
The mining and materials group had an underlying net loss after tax of $7 million for the year, down from an underlying net profit after tax of $296 million for the previous 12 months.
No interim dividend was paid and the company doesn’t plan a final dividend.
“The year has been a very challenging one,” says CEO Andrew Roberts. “We recorded stronger performances in both mining consumables and steel as expected, however earnings for the company on both an underlying and statutory basis were significantly affected by the deterioration in iron ore prices.”
Underlying EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) was $351 million, in line with the guidance range of $335 million to $350 million.
The company has a target 2016 cash break even price for iron ore of $US47 a tonne.
Earnings in the first half of 2016 are expected to benefit from increased sales volumes, lower scrap costs and further cuts to costs. The company has a $60 million target for cost savings in 2016.
However, a decrease in Asian steel prices and margins will impact earnings.