[Ferro-Alloys.com]

- Net profit after tax attributable to owners of the Company for the year ended 31 December 2020 (“FY2020”) of A$5.4 million as compared to A$56.6 million for the year ended 31 December 2019 (“FY2019”). 

- Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) of A$81.4 million for FY2020 compared with A$154.5 million for FY2019. ? Basic and diluted earnings per ordinary share of the Group of 0.73 cents for FY2020 as compared to 7.69 cents FY2019.

- Revenue from operating activities for FY2020 was A$784.6 million, representing a 24% decrease over FY2019. This decrease was primarily attributed to the softening of manganese ore and ferroalloy prices in FY2020, despite a 5% increase in total product volumes traded.

- Gross profit margin decreased to 12.3% in FY2020, down from 14.9% in FY2019. This was predominantly attributed to weaker ore and ferroalloy prices. 

- The Group’s share of results from its associates for FY2020 was A$16.5 million.

- Total borrowings decreased from A$473.9 million as at 31 December 2019 to A$415.0 million as at 31 December 2020 which included repayments against the Sarawak Project Finance Loan of US$16.1 million and foreign exchange translation differences. As a result, total borrowings to equity ratio decreased from 0.93 times as at 31 December 2019 to 0.89 times as at 31 December 2020. 

- Consolidated cash position of A$63.0 million (included cash collateral of A$17.1 million) as at 31 December 2020 as compared to A$63.7 million (included cash collateral of A$14.8 million) as at 31 December 2019.

- Net cash generated from operating activities of A$76.6 million for FY2020.

- Net asset backing per ordinary share of the Group was 63.56 cents as at 31 December 2020 as compared to 68.94 cents per ordinary share as at 31 December 2019, representing a 8% (or 5.4 cents per ordinary share) year-on-year decrease.

- With the Group having recorded a net profit after tax attributable to owners of the Company of A$5.4 million for FY2020, and to prioritise cash conservation in a volatile global environment which is still experiencing the negative effects of the COVID-19 pandemic, the Board has resolved not to declare a final dividend for FY2020. The dividend policy will be reviewed again when the results for the six months period ending 30 June 2021 are available.

The Group recorded revenue of A$784.6 million for the FY2020, which was a 24% decrease from the A$1.03 billion recorded for the FY2019. The decrease in revenue was predominantly attributed to the softening of manganese ore and ferroalloy prices in FY2020, despite a 5% increase in total product volumes traded by the Group as compared to FY2019. The increase in total product volumes traded was mainly from the increase in tonnages sold for manganese ore. Average transacted prices of OMM manganese ore and other third party manganese ores declined by approximately 39% and 22% respectively for FY2020 as compared to FY2019. This decrease was mainly attributed to the general slowdown in economic activity amidst the COVID-19 pandemic which resulted in an excess supply of port stocks in China. In addition, average transacted prices for manganese alloys and ferrosilicon (“FeSi”) also declined by approximately 11% and 8% respectively in FY2020.

Trading was impacted by the softening of the market as a result of the uncertain economic environment from continued tensions between the United States of America, Australia and China, and the slowdown of economic activity amidst the COVID-19 pandemic. These factors led to the shut-down of 4 FeSi furnaces (2 furnaces in February 2020, 1 furnace in May 2020 and 1 furnace in July 2020) due to the local government restrictions imposed on the hiring of new foreign workers arising from the COVID-19 pandemic, and a further 4 FeSi furnaces underwent annual scheduled maintenance in the fourth quarter of 2020. As a result, the Group’s FeSi volumes produced and traded from the Group’s 75% owned smelter in Sarawak decreased by 22% in FY2020. FeSi volumes traded in FY2020 were 171,502 tonnes, with a total revenue contribution of approximately A$250.2 million (FY2019: 220,219 tonnes with a revenue contribution of A$349.1 million).

Manganese alloy (high carbon ferromanganese (“HCFeMn”) and silicomanganese (“SiMn”)) volumes traded in FY2020 also decreased by approximately 13%. A total of 244,206 tonnes of manganese alloys were traded in FY 2020 (with a revenue contribution of approximately A$316.2 million) as compared to 281,815 tonnes of manganese alloys traded in FY2019 (with a revenue contribution of approximately A$407.9 million).

Platts reported that prices of FeSi to Japan dropped to US$975 per metric tonne at the end of June 2020, before recovering to close at US$1,060 per metric tonne at the end of September 2020. As global demand recovered towards the end of FY2020, steel mills began restocking ferroalloys at the same time, driving demand and raising prices of FeSi to Japan to US$1,365 per metric tonne at the end of December 2020 (as compared to US$1,038 per metric tonne at the end of December 2019). This increase was also due in part to reduced availability of supply of FeSi from China due to strong domestic demand, and a surge in global freight rates. Prices continued to rise into January 2021 (US$1,565 per metric tonne at the end of January 2021) off the back of similar trends and a broader recovery in global demand.

Other operating expenses increased to A$35.4 million for FY2020 from A$21.9 million for FY2019 mainly due to approximately A$13.8 million of expenses associated with the shut-down and maintenance of 4 FeSi furnaces at OM Sarawak. The shutdowns were brought about due to limited manpower at the Sarawak plant because of labour disruptions which arose from strict travel restrictions of foreign workers due to the COVID-19 pandemic. The shutdowns enabled maintenance programs to be brought forward and undertaken on FeSi 2 furnaces, as well as the conversion of another 2 FeSi furnaces to produce manganese alloys.

This business segment covered the operations of the FeSi and manganese alloy smelter operated by OM Sarawak (75% interest) and the Group’s 100% owned Qinzhou manganese alloy smelter operated by OM Materials (Qinzhou) Co Ltd (“OMQ”).

OM Sarawak and OMQ recorded revenues of A$548.7 million for FY2020 as compared to A$734.6 million for FY2019. The decrease in revenue was mainly due to the lower volumes of ferroalloys produced and sold, coupled with the continued softening of FeSi and  anganese alloy prices in FY2020 as compared to FY2019.

OM Sarawak produced a total of 167,443 tonnes and 227,406 tonnes of FeSi and manganese alloy respectively in FY2020 (FY2019: 230,735 tonnes of FeSi and 248,163 tonnes of manganese alloy) with a revenue contribution of A$521.9 million for FY2020 as compared to A$674.0 million for FY2019. As mentioned above, OM Sarawak shut down 4 FeSi furnaces during the year due to limited manpower at the Sarawak plant as a result of labour disruptions which arose from strict governmental imposed travel restrictions related to the COVID-19 pandemic which impacted upon a decrease in production volumes in FY2020.

The smelting segment recorded a negative contribution of A$5.3 million for FY2020 (FY2019: positive contribution of A$23.4 million) mainly due to the softening of market prices of FeSi and manganese alloy especially in the second half of FY2020 and the lower tonnages of ferroalloys produced and sold during the year. With the decrease in FeSi and manganese alloy prices by 8% and 11% in FY2020, total ferroalloy margins correspondingly decreased from 22% for FY2019 to 17% for FY2020.

Inventories decreased by approximately 5% to A$216.3 million as at 31 December 2020 from A$228.3 million as at 31 December 2019. This was mainly a result of a decrease in finished goods inventory from OM Sarawak as sales volumes for FY2020 were higher than the production volumes with 4 FeSi furnaces being idled progressively in FY2020 due to labour constraints arising from the COVID-19 pandemic.

Source: OM Holding Limited

• [Editor:kangmingfei]