The Australian reported that Arrium Limited, the steelmaker and iron ore miner formerly known as OneSteel, has been saved from a full year net loss by a carbon tax handout and an increase in the book value of its mining assets as it prepares for the minerals resources rent tax.
The Sydney based company said that it expected to log just a AUD 60 million net profit for 2011-12 when it reports next month, down by three quarters from a year earlier because of previously announced write downs, but boosted by a AUD 35 million credit for asset revaluation and AUD 45 million of carbon tax compensation.
While the headline number looked bad for the beleaguered manufacturer and miner, whose share price is less than half what it was a year ago, the underlying profit guidance of AUD 190 million beat most analysts' expectations.
The company is also sticking with February 2012 guidance that its steelmaking business will report positive earnings before interest, tax, depreciation and amortization in 2011-12 after an AUD 87 million loss the previous year.
Credit Suisse said that the underlying earnings guidance was about AUD 20 million higher than market consensus.
Mr Michael Slifirski analyst at Credit Suisse said that "This release is a positive announcement. How positive will not be known until we see where the profit has been achieved in Arrium's August 2012 full year report."
The difference between the underlying and reported Arrium profit guidance included AUD 124 million of write downs, announced in OneSteel's half year profit report.
Arrium is the first Australian miner to reveal a deferred tax credit as it boosts mine book values to offset more depreciation against its MRRT obligations.
Under the terms of the tax worked out by Ms Julia Gillard and big miners in the wake of the ousting of Mr Kevin Rudd, companies with established mines can get big tax write offs if they revalue depreciated assets at market value.
Tax credits from this revaluation, resulting in boosted bottom lines, are expected to be a feature of this reporting season and next, leading the market to focus on profits before significant items.
Mr Matthew Hope analyst at Credit Suisse said that "Prepare for messy financial accounts with the start of the MRRT. We suspect some financial reports in August will have companies booking deferred tax credits by writing up the value of mines against MRRT liability. It will be important to focus on underlying profit in the results, not reported."
Still, the MRRT boost could be limited. Treasury's tax take estimates look increasingly shaky in light of falling iron ore prices.
Fortescue Metals said that it did not expect to need to book a tax credit because royalty rebates and capital shelter far offset any MRRT liability.
Fortescue CFO Mr Stephen Pearce said that he had initially thought a multi billion dollar credit would be booked, but one was now not expected.
Source - The Australian
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