Chrome producer Ruukki Group has posted a strong rise in second quarter profits, but was slightly more cautious on the outlook than it has been in the past. EBITDA rose by 173% to EUR 1.6 million on sales of EUR 44.5 million. Production for the three months ended June 30th 2011 more than doubled to 92,849 tonnes.
The group, which is now a specialist chrome producer following the sale of its pallets business and sawmills, reported significant fluctuations in the ferroalloy market.
While second half production volumes are expected to be ahead of comparable figures for the same period last year, Ruukki is no longer expecting prices to rise.
Mr Thomas Hoyer CEO of Ruukki said that "Market conditions during the second quarter continued to be challenging, exacerbated by adverse currency moves resulting from our exposure to the South African Rand and the Turkish Lira. However I am pleased to report a second consecutive quarter of improved revenue and operating profit compared to 2010, driven by increased production levels and our ongoing focus on cost efficiencies across the group which has continued to deliver results."
He added that "The sale of the pallet and sawmill businesses now completes our transformation into a focused chrome producer. As we enter the second half of the year our strong balance sheet puts us in a good position to be able to weather the current market uncertainty as we seek to grow our resource base further."
The exit from timber and house building marks the first stage of Ruukki’s transformation as it focuses on becoming an integrated and growing miner and smelter. It already owns a speciality operation based in Germany and Turkey, which makes tailor made products used in the aerospace, nuclear power plant and the oil and gas industries.
And while this is a steady, high margin operation, it is also a niche concern with limited scope for serious expansion. However the foundation stones have been laid for an altogether more impressive business that is focused on South Africa.
In 2009 it paid around GBP 180 million for Mogale Alloys, a smelter of ferrochrome, silico manganese and stainless steel alloy, and followed this at the end of last year with the purchase of AIM listed Chromex, owner of the Stellite mine in the Transvaal Basin. It currently has four furnaces, two submerged arc and two direct current, with plans for another two DC furnaces, which are 30% more efficient than traditional arc furnaces.
More impressively it is planning to produce its own power, which means it won’t have to rely on the local generator Eskom for its electricity supply and will be able to control the cost of one of its key inputs. It has signed a memorandum of understanding with Chinese firm Metallurgical Group, and the 300 MW plant could be up and running in 2015.
(Sourced from www.proactiveinvestors.co.uk)
