26 Jan 2009 07:00
26 January 2009
International Ferro Metals Limited
("IFL" or the "Company")
Trading Update
International Ferro Metals announces a trading update regarding its anticipated financial performance for the half year to 31 December 2008 and the Company's expectations for the remainder of the financial year.
In the closing weeks of the six month period to the 31 December 2008, the Company experienced a rapid deterioration of the conventional industry-wide ferrochrome pricing mechanism that has been based upon published European ferrochrome prices. This led to negotiation and ultimately renegotiation of pricing following the shipment date and resulted in retrospective downward price revisions. Management has explored legal and commercial routes to assert the higher prices it had originally agreed on these shipments, but has now concluded the revised prices are in the best interests of the company. Final selling prices for the six month period were only recently settled and relate to shipments of 20,828 tonnes to China and 6,239 tonnes to Europe and North America. Price negotiations are ongoing in respect of a further 6,291 tonnes shipped to China in November 2008.
The recently announced Q1 2009 European benchmark price of US$0.79 per pound compared to the Q4 2008 price of US$1.85 per pound has required the Company to reduce the net realisable value of its ferrochrome inventory of 42,523 tonnes by approximately US$4.2m.
The overall financial impact of these price reductions on the Company's half year results is not expected to exceed US$18m and includes the write down in inventory. As a result, the Company does not expect to report a profit before tax for the six months to 31 December 2008.
IFL has also agreed delayed settlement terms in respect of certain ferrochrome shipments made prior to 31 December 2008 with a value of US$17.5m and payment is now due prior to 31 March 2009.
The weakness of current demand for ferrochrome and the lack of transparency for the remainder of the financial year lead the Company to believe that, despite the observed recent increase in Chinese demand, the financial performance of the Company for the year to 30 June 2009 is likely to be materially below current market expectations.
The figures set out above are subject to the normal process of review with the Company's auditors and may change prior to the release of IFL's interim financial statement to the market on 23 February 2009.
For further information please visit www.ifml.com or contact:
International Ferro Metals Limited
David Kovarsky, Chief Executive Officer +27 82 650 1192
Brunswick Group
Patrick Handley / Carole Cable +44 (0) 20 7404 5959
Numis Securities Limited
John Harrison / James Black / Stuart Skinner +44 (0) 20 7260 1000
About International Ferro Metals:
International Ferro Metals produces ferrochrome, the essential ingredient in stainless steel, from its integrated chromite mine and ferrochrome processing operations in South Africa. International Ferro Metals is listed on the London Stock Exchange under the symbol IFL.
Forward Looking Statements
This announcement contains certain forward looking statements which by nature, contain risk and uncertainty because they relate to future events and depend on circumstances that occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.