irc results in ham's words29 Mar 2019 04:24
In 2018, IRC’s performance has
been positive and our progress made during this challenging year is marked by increased EBITDA and
a US$68.2 million net profit, as well as by both the continued ramping up of K&S and the successful
refinancing of the ICBC loan. As K&S continued to ramp up its production, sales volume increased by
45% in 2018. EBITDA, a key performance indicator for IRC, increased by 42% to US$28.5 million.
The successful ramping up of K&S and its strong operating performance supported a reversal of asset
impairment provisions of US$90.5 million and accordingly, IRC reports a net profit of US$68.2 million.
Platts 65% iron ore spot price remained resilient and averaged US$90 per tonne, outperforming the
pessimistic market forecasts made at the beginning of the year. This was mostly caused by global
political and macroeconomic factors causing increased volatility in the market price of iron ore. Media
reports say that the Chinese government is tightening its pollution control policy and this has led to some
Chinese steel manufacturers opting to use as feedstocks the higher grade 65% iron ore that we produce.
This switch is reflected in the price premium spread for 65% Fe over 62% Fe, for which the gap widened
in the middle of 2018 and narrowed again towards the end of the year.
There are conflicting views about the market conditions. Some will have it that things will not get any
easier in 2019. The trade conflicts between the U.S. and China, lending restrictions in China, and the
cyclical slowdown in the automotive industry in the developed markets may affect the global demand
for steel. Others will tell you that the world market for steel – particularly in India, Africa and the
Asean block will mean that supply remains tight. Whichever is correct, I believe that IRC can navigate
these confusing tides and so I became a shareholder of IRC in December 2018.
As at 31 December 2018, the Group had gross borrowings of US$223.7 million (31 December 2017:
US$235.2 million). Most of the Group’s borrowings were denominated in US dollars. US$54.1 million
represents the Bridge Loan from Petropavlovsk and the rest represents the long-term borrowing drawn
from the ICBC loan facility which is guaranteed by Petropavlovsk. The Group’s weighted average
interest rate increased to 8.0% (31 December 2017: 6.4%) per annum mainly due to higher interest rates
of the bridge loans from Petropavlovsk
Sign In
Follow the stocks
