Saudi miner Ma’aden lifts off as profits rocket

A 70 percent year-on-year increase in gold production helped boost Maaden's profit by 120 percent in the first quarter. Getty
Updated 03 May 2018
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Saudi miner Ma’aden lifts off as profits rocket

  • Profits rise on increased gold production, revenues rise 32 percent
  • Ma’aden mines gold, copper, aluminum and phosphates in Saudi Arabia

LONDON: Saudi mining company Ma’aden cheerked the market on Thursday with first quarter figures significantly ahead of analyst expectations, sending the Tadawul-listed stock 2 percent higher.

Gold was the standout feature as production rocketed to 118,000 ounces, up 70 percent year-on-year — a quarterly record.

It has been a good time to lift production of the yellow metal, seen as a hedge against global geopolitical uncertainty.

Group net profit surged over 120 percent in the first three months of 2018 against the same period in 2017, and sales were up 32 percent.

“By continuing to generate greater production from our assets whilst maintaining pressure on costs, we were able to capitalize on the generally positive commodity price environment,” said CEO Khalid Al-Mudaifer.

Ma’aden, which mines gold, copper, aluminum and phosphates — all at sites in Saudi Arabia — is ramping up production across many of its operations. Investors have piled into the shares, which trade on 25 times forward earnings making them highly-rated, but relatively expensive.

The company’s portfolio includes a joint venture with Barrick Gold of Canada.

In an interview with Arab News, Youssef Husseini, mining analyst at broker EFG Hermes in Cairo, said: “These results are exceptional with the cost profile impressive after a cost-cutting program — the margin came in 400 basis points up from where we thought.”

Al-Mudaifer pointed to a 36 percent increase in earnings before interest, tax, depreciation and amortization (Ebitda), a key market measure.

Ma’aden’s new phosphate operation at Wa’ad Al-Shamal was said to be progressing well as was the next phase of growth at its largest ever gold mine, the “Mansourah Massarah project”. An investment decision on further expansion was expected in the second quarter.

Commodity price volatility was forecast to be a feature of 2018 “but as the first quarter results show, we are well placed to deliver strong profitability built on the basis of strong underlying trends in our core commodities,” said Al-Mudaifer.

The only potential fly in the ointment, said Husseini, was the possibility of higher energy costs if Saudi Electricity upped its charges before the year is out. “We shall have to wait and see,” he said.

Al-Mudaifer said the first quarter saw a drop in the price of aluminum but the price trend remained favorable compared to 2016 and 2017 and “we continue to believe in the long-term fundamentals for this metal.”

He added: “Phosphate prices remained robust as did gold and copper although the latter dropped slightly in the quarter after a year of solid gains in 2017.”

Cash generated from operations was SR543 million ($144.7 million); a decrease of 28 percent compared to the first quarter of 2017, primarily due to increased working capital requirements, said the company.

Ma’aden’s liquidity position remained strong with cash and equivalents topping SR6 billion.


Lufthansa profit warning spooks European airline sector

Updated 17 June 2019
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Lufthansa profit warning spooks European airline sector

  • Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called ‘attritional fare wars’

FRANKFURT: Germany’s Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings.
The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month.
In a statement issued late on Sunday, Lufthansa forecast annual EBIT of between €2 billion and €2.4 billion, down from the previously targeted €2.4 billion to €3 billion.
“Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said.
European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years.
Lufthansa cited falling revenue from its Eurowings budget business as a key reason for the profit warning.
“The group expects the European market to remain challenging at least for the remainder of 2019,” it said.
It also pointed to high jet fuel costs, which it said could exceed last year’s figure by €550 million, despite a recent fall in crude oil prices.
Ryanair Chief Executive Michael O’Leary last month warned of the impact of what he called “attritional fare wars” and said four or five European airlines were likely to emerge as the winners in the sector.
“No signs that anyone is prepared to reduce capacity, therefore we would anticipate the wave of consolidation in European short haul is not over,” said analyst Neil Wilson, analyst at London-based broker market.com.
Earlier this month global airlines slashed a widely watched industry profit forecast by 21 percent as an expanding trade war and higher oil prices compound worries about an overdue industry slowdown.
Lufthansa’s problems are centered on its European business, with a more positive outlook for its long-haul operations, especially on transatlantic and Asian routes.
Eurowings management is due to implement turnaround measures to be presented shortly, Lufthansa said, adding that efforts to reduce costs had so far been slower than expected.
Lufthansa’s adjusted margin for earnings before interest and tax (EBIT) was forecast between 5.5 percent and 6.5 percent, down from 6.5 percent to 8 percent previously, it said in a statement.
Lufthansa also said it would make a €340 million provision for in its first-half accounts, relating to a tax matter in Germany originating in the years between 2001 and 2005.