Aug. 14 (Bloomberg) -- Eurasian Natural Resources Corp., subject of a takeover bid by its founders and Kazakhstan, said first-half profit fell 55 percent on lower prices for ferroalloy used in steelmaking and higher financing costs.
Net income dropped to $221 million from $492 million a year earlier, ENRC said today in a statement. Sales slid 1.1 percent to $3.2 billion. The price of ferroalloys it sold declined by 11 percent from the previous year, while the cost of sales rose 9 percent to $1.92 billion. ENRC won’t pay a dividend.
ENRC sank 3 percent to close at 229.3 pence in London. Nomura Holdings Inc. said in a note to clients that the results were “below expectations.”
Mining company profits are being squeezed by slowing growth in China, the biggest consumer of commodities and the world’s largest producer of steel. Ferroalloys made up 38 percent of ENRC’s sales and iron ore 30 percent, the company said today.
Net debt rose 60 percent to $5.5 billion, it said. “Net finance costs increased by 89 percent to $164 million as a result of increased borrowings,” ENRC said in the statement.
The company increased output of saleable ferroalloys, used in steelmaking, 2.4 percent to 386,000 tons in the quarter from 377,000 tons a year earlier, while production in the first half was little changed at 750,000 tons. Saleable iron-ore output in the second quarter advanced 21 percent to 4.3 million tons.
ENRC’s founders Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov in June offered $2.65 in cash and 0.23 of Kazakhmys Plc stock for each share to take the company private. Investors in the ferroalloy company have until Aug. 28 to accept the offer after shareholders of Kazakhmys, which owns 26 percent of the producer, on Aug. 2 voted in favor of the transaction.
ENRC traces its roots to the founders’ participation in 1990s privatizations of Kazakh assets, which gradually merged into a single group and were listed in London in 2007.
The company is under investigation by the U.K.’s Serious Fraud Office over allegations of fraud, bribery and corruption in its activities in Kazakhstan and Africa.
ENRC “continues to cooperate fully with the SFO and are committed to a full and transparent investigation of all of our procedures and conduct,” the company said in today’s statement.
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