Kumba full year results

Another mining company to report full year numbers is Kumba Iron Ore, ahead of parents company Anglo American's results on Friday. Kumba is of course more than two thirds owned by Anglo American. You can read all of the highlights, in what was a very tough second half, here: Results highlights - 2014. It is important to note that the average price for Iron Ore over the period was 97 Dollars a ton, currently we are a little above 61 Dollars a ton. The company cites weaker demand from their main customer, China and more supply. Classic part of the mining cycle is when more supply comes on stream as a result of the higher prices. In the market overview segment, Kumba says: "Global seaborne iron ore supply rose 11% in 2014 led by a 24% increase in Australian exports as well as a 4% increase in exports from Brazil and 2% from South Africa."

Headline earnings was lower than the year prior at 11 billion Rand, headline earnings per share for the full year shrank 29 percent to 34.32 Rand per share. Revenues were lower (as a result of lower commodity prices) at 47.6 billion Rand. A final cash dividend of 7.73 Rand was declared, on top of the 15.61 declared at the interim stage. This is the lowest final dividend declared since 2010 and reflects the current environment. The company has lowered their dividend cover from 1.3 to 1.7 times, as the company "recognises the impact of lower iron ore prices on the company's cash generation amidst the continued uncertain market environment." For the first half, the company made 20.30, the second half you can see that it falls to 14 Rand. At a market price of somewhere around 237 Rand a share, with expectations of somewhere in the region of 23 Rand for the full year (a dividend cover of 1.7 times equals 13.50 Rand) which seems that the market has got it right.

If you buy them today and you are in some way "sure" that the iron ore price cannot go any lower (Andy Xie, he is bearish, he says it may go to 40 Dollars a ton), that yield seems attractive. Phew, it is tough, the company will continue to push volumes and try to keep costs under control, that is what they can do. The price of the product that they produce will be determined by the steel market, growing demand and consumption should see levels elevated to a new floor level. Your guess is as good as mine as to what is going to happen. The share price is down 3.3 percent, we continue to avoid single commodity stocks.