Nickel giant trebles profits
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MELBOURNE, Australia (Reuters) -- Australian miner WMC Resources has more than trebled annual net profit in 2003, driven by soaring nickel prices on the back of Chinese demand, improving western markets and supply concerns.
Wednesday's result beat expectations, with a strong nickel performance offsetting losses from its problem-plagued Olympic Dam copper and uranium mine and fertilizer operations.
WMC also forecast consistent output and a strong market for its commodities, with analysts expecting Olympic Dam to recover in 2004 from last year's 10 percent slide in copper output.
"Even though they have had a lot of problems, people have been looking past that and focusing on the exposure to commodity prices," Shaw Stockbroking analyst Andrew Richards said.
WMC Resources, the world's fifth-biggest nickel metal producer, reported strong demand for its products, particularly in Asian markets, including China.
"The outlook for WMC is for sustained and consistent production performance in a continuing strong market for our major commodities," Chief Executive Andrew Michelmore said in a statement.
Annual profit rose to Aust. $245.6 million ($191.9 million) from a pro-forma A$75.4 million previously, compared with analyst forecasts of about A$209 million.
The year-ago figure takes into account the 2002 split of WMC Ltd into two companies, WMC Resources and Alumina Ltd.
WMC Resource's shares gained nearly five percent before easing by early afternoon to be up 2.1 percent at A$5.43 in a slightly firmer overall market.
The company's shares had rallied more than 50 percent from the end of June to Tuesday's close, six times the gain in the wider market as investors watched nickel prices soar.
WMC Resources said average U.S. dollar nickel prices for 2003 increased 42 percent compared to 2002, although gains were eroded in local currency terms by the Australian dollar's appreciation against its U.S. counterpart.
Nickel division operational earnings before interest and tax (EBIT) increased to A$428.8 million, up from A$249.7 million a year earlier.
"The market may have been underestimating the sensitivity to nickel, as nickel prices have not been this high for a long time," Daiwa Securities analyst Mark Pervan said.
The average U.S. dollar price for copper increased 14 percent for 2003 over 2002, but the strengthening Australian dollar led to a 5 percent decrease in local currency terms.
Copper production was cut by a planned reline of the Olympic Dam smelter furnace and the failure of a heat exchanger.
The copper and uranium division made a loss of A$120.2 million, compared with a profit of A$27.6 million.
The company said its fertilizer division posted a slightly deeper loss despite increased production, as its Hi-Fert sales and distribution business was affected by drought.
WMC has been looking at how it can increase the value of its fertilizer operations, amid speculation of a possible sale.
However, it said Wednesday it would retain full ownership of the division, despite talks with a number of industry participants.
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