Eurasian Natural Resources Reveals Annual Losses

LONDON -- Eurasian Natural Resources Corporation (LSE: ENRC  ) released its preliminary results for 2012 this morning, and as of 9:10 a.m. EDT the shares had fallen 1.9%% to 307 pence after the company announced annual losses of $852 million against profit of $2 billion in 2011.

The Kazakhstan-focused natural-resources company revealed a basic loss of $62 per share for 2012, compared with 2011 EPS of $1.53. Revenue decreased by 18% to $6.3 billion, while operating loss was reported at $374 million. Cost of sales increased 6% to $3.7 billion, versus $3.5 billion the previous year, as a result of higher depreciation.

The preliminary results declared noncash charges for impairment and an onerous contract provision for about $1.5 billion, primarily related to Aluminum of Kazakhstan, the group's contract with RUSAL, and Boss Mining.

Chief executive officer Felix Vulis commented:

It is disappointing to have to announce writedowns and provisions across a number of the Group's assets, which have resulted in a basic loss per share for the year. Approximately 60% of this charge relates to the Group's alumina business and our onerous contract with RUSAL, which is primarily a reflection of the current state of the aluminum market. The investment of $2.3 billion into our assets in 2012 is important to our success as it will support our low cost position in Kazakhstan, bring new copper volumes in 2013 and reinforce our market-leading position in ferrochrome. Although volatility around pricing will continue, we expect strong demand for our products in the year ahead.

Eurasian Natural Resources also announced that it will not be paying a final dividend this year following annual losses due to a "poor pricing environment," leaving the interim dividend to comprise the total dividend per share for the year at just $0.065, in stark contrast to $0.27 the previous year. This leaves the company on a current yield of just 1.4%, while the shares have been on a downward trajectory over the last couple of years, having previously hit a high of 1,267 pence in 2010. Failing both income and growth-stock criteria, it will surely take something special for investors to regain faith in this one.

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