(Bloomberg) — Kumba Iron Ore Ltd. cut its dividend after full-year profit dropped 29 percent following a slump in the price of the steelmaking ingredient.
The final dividend will be 7.73 rand a share, bringing its full-year payout to 23.34 rand per share, 42 percent less than a year earlier, the Pretoria-based unit of Anglo American Plc said in a statement on Tuesday. Profit excluding one-time items fell to 11 billion rand ($1 billion), or 34.32 rand a share, from 15.4 billion rand, or 48.08 rand, in 2013, Kumba said. The average estimate of 10 analysts surveyed by Bloomberg was 33.50 rand a share.
Iron-ore prices fell 47 percent in 2014 after the largest miners, including Rio Tinto Group, BHP Billiton Ltd. and Vale SA, fueled a supply glut by investing billions of dollars to boost output and as China’s economy grew at the slowest pace in more than two decades.
“We do not expect a major recovery in prices anytime soon,” Chief Executive Officer Norman Mbazima told reporters on a conference call.
Kumba shares fell as much as 3.4 percent and were trading down 3 percent at 230 rand as of 9:33 a.m. in Johannesburg.
Output at Kumba’s Sishen pit in South Africa, the continent’s largest iron-ore mine, increased 15 percent to 35.5 million metric tons, the company said. Production at its Kolomela mine gained 7 percent to 11.6 million tons.
Increasing Output
Kumba will continue to increase output at its biggest mines amid the drop in prices, raising its 2017 forecast for production at Sishen to 38 million tons, while Kolomela will produce 12 million tons that year.
“It’s all very-low capital-intensity incremental tonnages from our current assets rather than bringing any new major project on line,” Mbazima said. “It doesn’t make much of a difference.”
Kumba’s Thabazimbi mine, which produced 1.1 million tons last year, is under review after the company took a 439 million- rand impairment charge on the asset.
The company increased its dividend cover to 1.7 times from 1.3 times in the first half to recognize “the impact of lower iron-ore prices on the company’s cash generation amidst the continued uncertain market environment,” it said.
