Arrium CEO Says Weaker Australian Currency to Improve EarningsDavid Stringer
Arrium Ltd., Australia’s fourth-largest iron ore producer, said a decline in the local currency will boost earnings from this quarter and help its steel business compete against imports.
Every one cent change in the Australian dollar against its U.S. counterpart will probably deliver a benefit of between A$10 million ($9.3 million) and A$12 million on Sydney-based Arrium’s earnings before interest, tax, depreciation and amortization, Chief Executive Officer Andrew Roberts told reporters in Melbourne.
Australia’s dollar has tumbled 12 percent in the past three months, the worst performer among the Group of 10 major developed currencies. The Aussie gained 1.1 percent to 92.74 U.S. cents as of 4:57 p.m. in Sydney.
“It takes about three months for that type of benefit to flow through when we have any material change in” the foreign exchange rate, Roberts said. “I would be expecting that benefit would be more related to the business in the first quarter onwards of this financial year.”
The weakening Australian dollar is aiding in the translation of overseas earnings and lowering the price of domestic steel as it competes with imports, he said. Arrium is Australia’s second-biggest steelmaker.
Arrium, which generated 27 percent of revenue outside Australia in fiscal 2012, is “still very positive on China, even in the current environment,” said Roberts, who became CEO on July 1. China’s exports and imports unexpectedly declined in June, stoking concerns over a slowdown in the world’s second-largest economy.
The company’s shares climbed 5.5 percent today to 87 cents, trimming its decline for the year to 4.4 percent.
“We are continuing to see very strong steel demand, and that will flow through into iron ore,” he said. “What we are seeing at the moment is something that is short-term.”
The company plans to carry out exploration work in South Australia’s Gawler Basin at gold and copper prospects, Roberts said earlier in a speech in Melbourne.