Iluka books loss on back of write-downs

IIluka Resources today announced a net loss after tax of $85.9 million, a result largely brought about by asset write-downs and provisioning costs of $217.8 million.

The profit figure is in stark contrast to 2004's after tax net profit of $94.8 million.

Western Australian operations' EBIT declined by 10.4 per cent to $84.5 million.

Excluding the one-off charges, the 2005 after tax net profit increased by 39.1per cent to $131.9 million.

The one-off charges relate to non-cash write-downs in the carrying value of the mid west Western Australian operations of $67.3 million (after tax) and the Murray Basin assets to the tune of $61.6 million after tax.

Write-downs and provisioning costs of $88.9 million after tax associated with the staged closure of the Florida/Georgia operations in the US, were also factored into the result.

Notwithstanding the write-downs, the company generated strong operating cash flows of $227 million in 2005.

The results were headlined by an increase in sales revenue of 12.4 per cent to $921 million, attributed to higher zircon prices and higher overall mineral sands sales.

These positive factors were offset by higher unit costs for mining and concentrating, and a loss from the Florida/Georgia operations.

Iluka managing director and chief executive Mike Folwell said the company's 2005 results were adversely affected by the write-down in carrying values and that of the total pre-tax write-downs, $273.5 million were of a non cash nature.

"I regret the magnitude of the write-downs. However, the action in relation to Florida/Georgia represents a necessary portfolio and capital management decision. In the case of the Mid West and the Murray Basin, changing externalities and a rigorous review of the main input costs to these businesses have led to the charges," he said.

In other areas of the business, Narama Coal contributed an increased EBIT of $15.4 million, due mainly to higher sales volumes, and Area C iron ore royalty and production payments made a significant contribution to the result.

Demand for titanium feedstock products remained strong in 2005 and despite an oversupply of the resource, Iluka achieved price increases for its preferred high grade feedstocks, with further increases for these products secured in 2006.

Looking forward Mr Folwell said that new mines at Gingin and Wagerup in 2005, and new developments at Waroona in south west WA and Adamson in the state's mid west planned for 2006 were expected to mitigate grade decline and contribute to higher zircon production in 2006.

Iluka's 2006 earnings are also expected to be influenced by continuing high iron ore prices and potential production capacity expansions at Area C.

On the back of the result the company has declared a final dividend of 12 cents per share, franked to 80 per cent.