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Southern Alliance Mining sees earnings plunge 30% in maiden results announcement since listing

Amala Balakrishner
Amala Balakrishner9/25/2020 01:22 PM GMT+08  • 3 min read
Southern Alliance Mining sees earnings plunge 30% in maiden results announcement since listing
SAM has proposed a final dividend of 0.6 cents.
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Earnings of iron-ore producer Southern Alliance Mining (SAM) plummeted 30% to RM62.1 million ($20.5 million) in FY2020 ended July 31, from the RM88.2 million posted a year ago. The dip follows a surge in tax expenses to RM24.9 million.

The latest results is a first for the company which went public at 26 cents a share on June 26.

See: Southern Alliance Mining first to list amid Covid-19 outbreak and Southern Alliance Mining gains two cents on Day One of trading

On a fully diluted basis, this translates to earnings per share of 12.7 sens in FY2020, compared to 18.16 sens in the previous year end.

Revenue for the year was up 34% to RM254.2 million thanks to an increase in sales volumes and higher average selling prices.

For instance, the sales volume of iron ore concrete was up 5.9% to 557,000 dried metric tonnes (DMT). This translated to a 2.5% uptick in their average selling price to reach RM357 DMT.

Sales of crushed iron ores similarly grew four-fold to some 92,000 metric tonnes (MT), thereby pulling average selling prices up by 23.4% to RM410.29 per MT.

Aside from these segments, SAM benefitted from fresh sales of 212,000 DMT of iron ore tailings in FY2020.

Collectively, the higher turnover increased the group’s cost of sales by 16% to RM147.1 million. Key areas of increase were seen in operating costs such as tribute expenses, staff costs and subcontractors’ wages, a negative inventory movement and port charges.

In this time, SAM’s gross profit surged by 73% year-on-year to RM107.1 million while net profit before tax was up 44% to RM87.0 million.

As at July 31, SAM’s cash and cash equivalents stood at RM149.9 million, up significantly from the RM33.1 million it had at the end of its FY2019. Net asset value per ordinary share stood at RM46.38 cents, compared to RM33.42 cents a year ago.

The stronger position was a result of a 203.5% increase in its net cash flows from operating expenses to RM111.7 million. Gross proceeds of RM43.1 million from its recent listing also provided a lift to its balance sheet.

So far the group has used $950,000 or 7.96% of its IPO proceeds. Of this, $655,000 went into investments for mining equipment and infrastructure, while the remaining $295,000 has been used for its general working capital.

The group has proposed a final dividend of 0.6 Singapore cents for FY2020, which represents a pay-out of approximately 14.7% of its net profit after tax.

“The encouraging set of full-year financial results marked a strong start for our journey as a publicly- listed company. This was supported by having a unique product mix that brought us diversified revenue streams and market opportunities in two industry sectors,” says Pek Kok Sam, SAM’s CEO and Executive Director.

Pek notes that the Covid-19 pandemic has had a positive impact on the prices of iron ores, which surged from US$90-100/tonne ($123.80 - $137.52/tonne) early this year to reach a five-year high at US$126/tonne on September 16.

This follows a disruption in iron ore supplies from Brazil – which is one of the main iron ore producers in the world - as well as a robust demand from China’s upcoming infrastructure projects.

Looking ahead, Pek believes iron ore prices could pull back moderately to range between US$100130/tonne for the rest of the year.

“We [will] continue to enhance our facilities and infrastructure to improve operational efficiency, SAM will be in a strengthened position to serve our customers better in a favourable iron ore market,” Pek stresses.

As at 1.23pm, shares of SAM were up a cent or 3.57% to 29 cents.

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