Global Arab Network | Saudi Arabia: Ma’aden Mining Company Recorded Loss of $ 3.41 Million

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Saudi Arabia: Ma’aden Mining Company Recorded Loss of $ 3.41 Million

Global Arab Network - - Maha Karim

Wednesday, 09 February 2011 21:06

Saudi Arabia Ma’aden Mining Company Recorded Loss of $ 3.41 Million

Saudi Arabia - Saudi Arabian Mining Company (Ma’aden) recorded after tax loss of SAR12.8mn ($ 3.41 million) (LPS: SAR0.01) in 2010 as compared to the net income of SAR390.1mn (EPS: 0.4) recorded in 2009, Global Arab Network reports according to Global Investment House. The decline in bottom line was mainly due to massive decline in investment to SAR168.3mn in 2010 from SAR314.4 recorded in 2009. However, the company has witnessed a growth of 20.1% and 1.9% in gross and operating profit to SAR394mn and SAR89.6mn, respectively, in 2010 as compared to Global Research full year estimate of SAR393mn and SAR84mn for similar profitability indicator.

Quarterly performance

On a quarterly basis, the company’s bottom line suffered most in 4Q10 on the back of unexpected decline in other income to loss, which led the company to record net loss of SAR64.4mn (LPS: SAR0.1) as compared to our estimate of SAR28.4mn (EPS: SAR0.03) and after tax profit of SAR333.8mn (EPS: SAR0.4) recorded in corresponding quarter last year.

Gold business overview

The company’s revenue from gold business was recorded at SAR706.5mn in 2010, a growth of 11.3% over 2009, despite lower volumetric sales recorded in 2010. Hence, Global Research believes, the growth was mainly associated with the improvement in the average prices of gold in 2010 to USD1,228.5/oz as compared to the average of USD984.9/oz recorded in 2009. In addition, the company has not disclosed any particular reason of decline in volumetric sales in 2010, however, the possibility of depletion had an impact on old fields which declined overall production volumes.

Phosphate & aluminum complexes key growth drivers

We believe, the company’s upcoming phosphate and aluminum complexes will play vital role in order to (i) bring core-operational diversification from gold to phosphate and aluminum related products, (ii) strengthen operational integration (since the given operational of these two projects are well integrated in their respective complexes) (iii) expand the company’s overall production range to other industrial minerals and (iv) sustain the corporate growth during the phase of replacing new gold field with the older one.

Robust financial growth expected

Based on Global Research expectations, the commencement of commercial operation from phosphate complex in 4Q10 will lead the company’s sales revenue and net profit to show a mammoth growth in 2011 & 2012 with better profitability margins. Moreover, the expected inauguration of aluminum in 2014 will be another milestone for the company, which will increase company’s sales revenue to grow at a CAGR of 106.6%, during 2010-14. In addition, the company’s gross and net profitability margins will reach at 66.4% and 30.1% in 2014 as compared to 55.8% and -0.1% recorded in 2010, respectively.

Valuation update

Based on adjusting the discounted impact of phosphate project on company’s cash flow, Global Research has come up with updated consolidated fair value of SAR25.3/share from the previous fair value of SAR21.6/share, which offers potential upside of 5.7% over market price of SAR24.0 (as on 07th Feb 2011). Global Research, therefore, maintain HOLD for the stock.

Global Arab Network

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