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.
Hi Rmp6868,
Arrium does NOT have $2 billion in debt.
The FY14 accounts have Net debt = $1,708m
Gearing is 31%.
FY14 Current Assets - Current Liabilities - Cash = 2671 - 1781 - 650 = $240m
So in a way you can subtract $240m from Net Debt to get a lower debt number of $1.468m
Arrium is not just an Iron ore business, It has two other very significant businesses.
FY15 Interest costs = $1,708m * 5.5% = $94m
Steel which is cash flow neutral with a currency 0.92 after Stay in Business capex. Steel will generate significantly higher profits and cash flow when the currency falls.
Mining Consumables which has cash flow that pays all the Arrium's interest and $60m leftover after capex.
i.e. FY14 $187m + $15 (Cost Saving) - $94m (interest for the group) - $30m (Stay in Business Capex) = $63m
Mining Consumables profits should also have a benefit from a 4% capacity expansion coming online in July 2014. Plus the return of one of their big customers in Indonesia. Maybe $10m in total.
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:
69.0¢ Sentiment: Hold Disclosure: Held