Mineral Resources profits could fall 32%

18/11/2008 - 13:09

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Mineral Resources has forecast its profits in the FY2009 could potentially fall by 32 per cent following this financial year's profit growth of 133 per cent.

Mineral Resources profits could fall 32%

Mineral Resources has forecast its profits in the FY2009 could potentially fall by 32 per cent following this financial year's profit growth of 133 per cent.

The Bibra Lake-based mining services company announced their profits had increased to $47.1 million for the financial year ending in June, but due to uncertainty across world markets it could not provide definitive financial guidance to the market for the 2009 financial year.

Mineral Resources chairman, Peter Wade suggested the quantum and pricing of processed mineral sales between now and June 2009, the Australian dollar relative to the US dollar as well as shipping costs from Port Hedland to China were impacting accurate forecasts.

Mr Wade said the board had forecast a range of profitability that covers a range of scenarios around the projected levels of export shipments of iron ore and manganese through to year end.

"Our expectation for the year is a net profit for the FY2009 year in the range of $32 million - $51 million," Mr Wade said at today's AGM.

"We recognise that is a large range but it reflects the volatility of the market and the level of uncertainty that exists across our key forecast inputs."

Despite this uncertainty Mr Wade was confident that China and India would continue to achieve growth and performance from significant and ongoing industrialization and urbanisation of their populations.

"We believe their projected growth will continue to drive strong long term demand for our products and services," he said.

However, Mr Wade pointed out that the slowdown in the sale and export of both manganese and iron ore had limited the tonnages sold in the FY2009 year to date and he foreshadowed that the softness in demand will remain while the stockpiles of bulk commodities at the ports in China are worked through.

"We believe that demand for those steel making materials will recover from this current constrained level in the third quarter of FY2009 and that the current disconnect between contract and spot prices will be resolved," Mr Wade said.

"Mineral Resources has made a conscious decision that the current sales prices for these products, reflecting the oversupply at the ports in China, does not recognise the true value of the minerals.

"We will not sell at the current opportunistic pricing offers that fail to recognise the inherent value of our product and, accordingly, export tonnages in the FY2009 year to date have been restricted."

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