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.
Just a thought....what do you think is going to happen to Arrium's steel and Consumable (aka steel ball) businesses when the global glut of steel is fuelled with a glut of cheap iron ore and cheap energy?
The balance sheet will need tidying up when some Asset book values are re calibrated to market. (Eg Recycling hasn't made a profit for 5 years, but still carrying hundreds of million of goodwill)
If you are both informed and long, you're courageous.
ARI Price at posting:
69.0¢ Sentiment: Sell Disclosure: Not Held
