The resources sector is now licking its wounds from a testing period of global volatility, fluctuating currency and commodity prices, as evidenced by the spate of externally impacted profit results, write downs and cost trimming focused outlooks that have greeted investors in the current reporting season.
Economic news
The HSBC Flash purchasing managers index (PMI) slipped to 50.4 in February, its lowest reading in four months. Despite the fall, analysts say the underlying strength of Chinese growth recovery remains intact.
Ratings agency Standard & Poor’s has downgraded Rio Tinto Limited’s
(ASX:RIO) outlook to negative and re-affirmed its A-minus credit rating, saying the global miner’s debt is rising faster than expected. S & P says Rio’s debt will rise throughout 2013-14 unless it makes large asset sales or iron ore prices remain about $US120 a tone.
Commentary
BHP Billiton claimed in its half yearly report that Chinese growth is set to be managed in a positive yet conservative fashion: “...a modest improvement in the global economy is anticipated over the next 12 months. In China, infrastructure investment and fiscal policy are likely to be adjusted in a prudent manner to underpin stable growth, consistent with the Government’s target.”
Passing the baton at BHP
Incoming BHP Billiton Limited (ASX: BHP) boss Andrew MacKenzie has flagged a focus on cost cutting, planning to maintain the miner’s current long term strategy when he replaces Marius Kloppers on May 10.
Outgoing BHP Billiton Limited
(ASX:BHP) boss Marius Kloppers is reportedly poised to exit the company with cash and shares worth a whopping $75 million. If realised at current prices, the payout would mark one of the largest in Australian corporate history.
Write downs and cost cutting the flavour of the reporting day
Gold producer Kingsgate Consolidated Limited’s
(ASX:KCN) first half net profit fell 76 per cent after it wrote down $14.9 million against its exploration assets.
Mineral sands producer Iluka Resources Limited
(ASX:ILU) has flagged up to 200 job cuts and plans to lower production following a 33 per cent fall in its full year profit.
Iron ore producer Atlas Iron Limited
(ASX:AGO) reported a first half loss of $256 million on the back of writedowns in the value of multiple exploration areas, including its undeveloped Horizon 1 and 2 project areas in the Pilbara region.
Profit results
Mining and services company Ausdrill Limited
(ASX:ASL) says a slowdown in the mining sector is behind a 12 per cent fall in its half year net profit of $48.1 million.
Pilbara focused iron ore producer Fortescue Metals Group Limited
(ASX:FMG) says weaker iron ore prices are behind its 40 per cent first half profit fall.
Whitehaven Coal Limited
(ASX:WHC) says lower coal prices and delays to operations battered its first half earnings, after reporting a $47 million loss.
Contract awards
Saracen Mineral Holdings Limited
(ASX:SAR) has awarded GR Engineering Services Limited
(ASX:GNG) an engineering contract for the Carosue Dam Plant Expansion in Western Australia.
Engineering company Monadelphous Group Limited
(ASX:MND) has won a $260 million iron ore construction contract from global mining company Rio Tinto Limited
(ASX:RIO).
Leighton Holdings Limited
(ASX:LEI) subsidiary Leighton Contractors has won a contract extension for underground works on the Chevron-operated Gorgon project in Western Australia.
Joel Spreadborough
