Kumba Iron ore results decent enough

Another good set of numbers from the Iron ore miner, even though profits were down due to lower Iron ore prices. Here are the numbers from the release.


"Kumba's headline earnings were R7.4 billion for the six months ended 30 June 2012; 18% below the R9.1 billion achieved in the first half of 2011. The decrease in earnings was primarily as a result of substantially weaker iron ore export prices together with cost increases which were partially offset by higher export sales volumes for the six months. The higher export sales volumes and a more favourable Rand/US Dollar exchange rate aided the 5% growth in revenue to R25.2 billion for the six months, another record for the group, despite the decline in iron ore prices. Attributable and headline earnings for the period were R23.05 and R23.07 per share respectively, on which an interim cash dividend of R19.20 per share has been declared."


They expect Iron ore prices to settle at these levels so let's assume a similar amount is earned in the second half. That puts the company on a forward PE of 12 and a whopping dividend yield of 6.7% according to my calculations. Total Production is up 13% thanks to the Kolomela ramp up which again is running well ahead of schedule. The Sishen mine production was slightly down, 4%, due to weather and some operational issues.


Their prospects seem muted to positive. They have seen a levelling out in China but feel current stimulation will stabilise things. Don't forget that historically Iron prices are still extremely inflated even though they have come down somewhat this year. We like the stock but as with any single commodity miner it is a wild ride. At least you get paid a handsome dividend while you ride the volatility.