Bumper year for Ispat Iscor
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ANALYSTS HOPE TO GAIN MORE CLARITY NEXT WEEK ON STEEL MAKER`S DIVIDEND POLICY
Trade and Industry Editor
ISPAT Iscor is expected next week to report bumper financial results for last year, when the steel industry recorded record high prices driven mainly by Chinese demand for steel and raw materials used to make steel.
Merrill Lynch said it expected headline earnings of R10,30 a share for the year to December.
The I-Net Bridge consensus forecast is R10,20 a share.
Cazenove put the figure at R10,34 last week.
Ispat Iscor which has changed its financial year end to December posted headline earnings of R5,57 a share for the year to June 2003.
Merrill Lynch said on Friday that it expected Ispat Iscor to declare a final dividend of R2 a share after paying an interim dividend of R3 a share.
The company said in a report on the steel maker on Friday that a R2 final dividend would leave Ispat Iscor with `an adequate level` of R1,5bn net cash at the end of March this year.
Analysts hope to gain more clarity on the group`s future dividend policy during the release of group results on February 10.
Ispat Iscor CEO Davinder Chugh said earlier that it would submit a review of its strategy in this regard to its board by the end of last year. The interim dividend was announced subsequent to the group`s board meeting last month, but Ispat Iscor has kept the market waiting for news on a new policy.
The steel maker is also expected to lift the veil next week on capital projects that would influence dividend payments. Among these is a R450m project to revive market coke-production facilities at the group`s Newcastle steel works. The group is to expand steel production by 1-million tons a year.
Merrill Lynch said on Friday Ispat Iscor could comfortably pay a dividend of R10 a share in its new financial year. The company forecast a 26% rise in Ispat Iscor`s earnings to R13 a share in the 2005 financial year, compared with 2004, on the back of higher average steel prices.
`Our forecast assumes 2005 average steel prices will be higher than 2004 prices,` it said.
Higher average prices were forecast, also by Ispat Iscor, despite strong growth in demand in China slowing sharply, partly through measures by the government to control the overheating economy. China consumes 25% of global steel.
Steel prices appeared to be coming off their peak.
Merrill Lynch said hot-rolled coil import prices in the US had declined by $70/ton from their peak, and the European benchmark spot price were down by 10/ton this month.
Merrill Lynch expected Ispat Iscor`s earnings to fall to R9,60 a share in the 2006 financial year as average steel prices decline.
Ispat Iscor was also expected to release more information regarding the mooted review of its business assistance agreement with major shareholder Mittal Steel, previously LNM.
The steel maker had paid large sums to Mittal in return for sustainable savings that the AngloDutch company helped to effect at South African operations.
Shareholders initially objected to a renewal, as Mittal Steel had become a large stakeholder in Ispat Iscor since the start of the first business assistance agreement about three years ago.
Ispat Iscor`s shares closed at R57,20 on Friday
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