In my continuing series of posts comparing Arrium with FMG and AGO.
This analysis ignores 'accounting DA' / tonne which is it's biggest weakness.
This is an analysis to work out FY15 cash flow (after interest and stripping) for ARI, FMG and AGO using the current iron ore spot price of $87.30.
Note: I have Arrium Interest costs as JUST an Iron Ore business at $0. Due to their other cash generating businesses (Consumables, Steel, Recycling). At the end of this post my calculation for this is explained.
Conclusion : Arrium as JUST an Iron Ore business is cheaper than FMG and AGO today!
FMG's numbers are converted to AU$ using 0.935
Column 1
Column 2
Column 3
Column 4
0
Using FY14 Revenue and EBITDA to calculate Cost / tonne.
ARI
FMG
AGO
1
Adjustment of 62% Price
95%
86%
81%
2
3
AUDUSD
0.935
4
Revenue
1569
12570
1098
5
EBITDA
686
6028
248
6
COGS
883
6542
850
7
Tonnes
12.9
124.2
10.9
8
Calculated cost / tonne
68
56
78
9
10
FY15 Interest Costs AU$m
see below $0
770
25
11
Interest / tonne
6
2
12
Stripping / tonne
6
8
13
Total Other Costs (interest + stripping)
6
14
2
14
15
AU$ Cost / tonne after deduction interest and stripping. *
74
71
80
16
17
Today's US$ Spot
87.30
87.30
87.30
18
19
AU$ Spot
93
93
93
20
21
AU$ Realised price (adjustment to 62% price for grade)
89
80
76
22
23
Cost / Tonne (calculated above *)
-74
-71
-80
24
25
AU$ Profit per tonne at Iron Ore US$87.30
14
10
-5
26
27
FY15 Tonnes
13
160
12.8
28
29
FY15 Cash Flow AU$m
187
1,562
-60
30
31
Cash Flow Converted to EPS **
0.14
0.50
-0.07
32
0.76
4.10
33
Current share price / cash flow EPS **
5.5
8.2
-
The last line shows that Arrium is cheaper than FMG.
If FMG was $3 today then Arrium and FMG would be the same value. Or Arrium was $1.10 today.
I have Arrium Interest costs as JUST an Iron Ore business at $0. Due to their other cash generating businesses (Consumables, Steel, Recycling).
Column 1
Column 2
Column 3
Column 4
Column 5
0
Stay In Business
1
FY15
EBITDA
Capex
Tax
2
Consumables
202
35
42
3
Steel
51
52
4
Recycling
12
6
5
Head Office
16
Total Cash Flow
6
Total
249
93
42
114
7
8
Total Cash flow
114
9
Interest
110
10
Net Interest Costs
4
A percentage of Arrium's interest costs are for working capital (inventory + Receivables - Payable's) of their other businesses (Consumables, Steel, Recycling). It is hard to work out exactly but it is greater than 25% of their Net Debt. This is not included in the above analysis.
The writer implies no investment recommendation. This report contains material speculative in nature. Investors should seek professional investment advice. The writer owns shares in Arrium.
ARI Price at posting:
76.2¢ Sentiment: Hold Disclosure: Held