Eramet forecast increase in H2 operating profit due to high manganese, nickel prices
- Strong growth in group turnover in 3rd quarter 2007 (+ 24,1 %)
compared with 3rd quarter 2006
- Eramet Manganese registers turnover growth of 51.2 %
compared with 3rd quarter 2006
- Very sharp increase in forecast current operating income in 2nd half 2007
compared with 2nd half 2006
The consolidated turnover of the Eramet group rose by 24.1% in the 3rd quarter 2007 compared with the 3rd quarter 2006, and by 21.7 % over nine months compared with the same period in 2006.
Eramet Manganese registered particularly strong turnover growth (51.2% in the 3rd quarter 2007 compared with the 3rd quarter 2006), thanks to a very steep rise in the prices of ore and manganese alloys.
Eramet Nickel:
Turnover in the 3rd quarter 2007 was stable at the high level seen in the 3rd quarter 2006, and was down by comparison with the exceptionally strong average quarterly levels seen in the 1st half 2007
Eramet Nickel registered stable turnover in the 3rd quarter 2007 compared with the 3rd quarter 2006. However, in the first nine months of the year, turnover rose by 30.8% compared with the same period in 2006, due to exceptional growth in the 1st half 2007. The announced decline in nickel deliveries by Eramet Nickel due to the drop in demand was offset by nickel prices, which remained high.
As expected, there was a substantial correction in the global stainless steel market in the 3rd quarter 2007. Global production of austenitic stainless steel, which represents about two thirds of global nickel demand, fell sharply in the 3rd quarter 2007 to about 20 % less than in the 3rd quarter 2006. The adjustment came in the wake of excessive production, caused by the simultaneous ramp-up of several new stainless steel plants in the 4th quarter 2006 and the 1st half 2007, mainly in China, and by a running down of stocks due to volatile nickel prices.
Nickel prices on the LME continued the decline that began at the end of May 2007, reaching 25,000 USD/tonne during August, before rebounding to about 31,000 USD/tonne at the end of September 2007.
Metallurgical production at the Doniambo plant in New Caledonia reached 15,174 tonnes, down 4.6% compared with the 3rd quarter 2006. It was limited to some extent by planned refurbishment work on a rotary furnace and by particularly bad weather. Over nine months, it fell by 8.3% to 45,318 tonnes compared with the same period in 2006, mainly due to the effects of the strike at the end of 2006.
In this context, deliveries of nickel by Eramet Nickel declined by 18% in the 3rd quarter 2007 compared with the 3rd quarter 2006, to 11,109 tonnes.
The nickel hedging programme covered about 7,500 tonnes in the 3rd quarter 2007, at an average price of 21,300 USD/tonne.
Eramet Manganese:
Very strong turnover growth (+ 51.2%) in the 3rd quarter 2007 thanks mainly to rising prices
Eramet Manganese registered turnover growth of 51.2% in the 3rd quarter 2007 compared with the 3rd quarter 2006 and growth of 19.8% in the first nine months of the year, due to an accelerated rise in manganese prices.
Global production of carbon steel, the biggest consumer sector for manganese, rose by 7.3% in the first nine months of the year.
Manganese alloy and manganese ore prices rose very steeply in the 3rd quarter 2007. FOB prices for manganese ore more than doubled in September 2007 compared with September 2006. Alloy prices also rose sharply (about 40% in September 2007 compared with September 2006).
Deliveries of manganese alloys by Eramet Manganese increased by 8.4% in the 3rd quarter 2007 compared with the 3rd quarter 2006, and by 4% in the first nine months of 2007 compared with the same period in 2006.
Production of ore and sinter by Comilog in Gabon increased by 3.8% in the 3rd quarter 2007 compared with the 3rd quarter 2006, to 794,000 tonnes, and by 12.9% in the first nine months of the year compared with the same period in 2006, to 2,443,000 tonnes.
Revenues from catalyst recycling grew by 6% in the 3rd quarter, thanks in particular to the increase in molybdenum prices.
Key points in 3rd quarter 2007
• On 1 August 2007, there was a technical incident at the new nickel ore enrichment plant at Tiebaghi (New Caledonia). As a result of this incident, which has not affected forecast production for 2007, the target for metallurgical production of nickel in the full-year 2008 has been reduced by about 1,000 tonnes.
• Furthermore, Erasteel also announced on 10 September 2007 the construction of a new high-speed steel drawing shop at Tianjin, China. This facility, scheduled for start-up in the 4th quarter 2007, will draw wire rod imported from Erasteel's European plants. This investment of over 10m euros strengthens Erasteel's position as the world leader in high quality high-speed steels, and will allow it to support the rapid growth of its customers in Asia.
Results outlook for 2007
Nickel prices on the LME remain high, at about 31,000 USD/tonne on average in October. The global stainless steel market is still being affected by cuts in production and slower demand for nickel. As has been mentioned, nickel deliveries by Eramet Nickel should be just under 55,000 tonnes in 2007.
The output of the metallurgical nickel plant at Doniambo should reach about 61,000 tonnes in the full-year 2007, allowing for stocks to be replenished after falling to an excessively low level at the end of 2006 as a result of the strike.
The hedging programme in the 4th quarter 2007 covers about 7,600 tonnes at an average price of about 22,500 USD/tonne. Furthermore, nickel put options protect about 3,600 tonnes in the 4th quarter 2007 at an average price of 31,900 USD/tonne.
The manganese market remains buoyant, thanks to continued robust demand from the carbon steel sector, and persistent tension in ore supply. Manganese ore spot prices have continued to rise since the start of the 4th quarter. Manganese alloy prices are stabilising at a high level.
The activity of the Alloys division remains very positive going forward. Aubert & Duval's new closed-die forging plant and its 40,000-tonne press are ramping up, keeping pace with demand from the aeronautics market.
In this context, and given the favourable developments seen in the 3rd quarter 2007 and the outlook for the 4th quarter, particularly for Eramet Manganese, group current operating income in the 2nd half 2007 will be substantially higher than in the 2nd half 2006. – Edited Press Release |
