Mineral sands miner Iluka Resources will cut its production and sales volumes to protect margins amid downturns in global markets.
The company lifted revenue in the first half of the year, despite sales dropping by more than a third.
However the situation has deteriorated since it posted a record $542 million profit for 2011 and moved into the ASX top 50, with the company providing a negative appraisal of economic conditions in all of its markets including China, Europe, the US, India and south-east Asia.
Managing director David Robb said in a statement on Thursday that the outlook of major regional economies was more pessimistic.
“The company, therefore, does not seek to maximise production or achieve particular sales volumes outcomes versus production in any given year, if such outcomes do not reflect demand characteristics in markets,” he said.
“As the company has stated on previous occasions, a focus of its approach is attempting to protect unit margins, to the extent it is possible and practicable to do so, by varying production in line with demand.”
Iluka was in a better position than after the global financial crisis, he said, due to positive margins on volumes sold, and a strong balance sheet, providing it with flexibility.
A weak Chinese property market had hit sales of zircon, which is needed for ceramics products used in the country’s construction and manufacturing sector.
Demand in Europe for rutile, used in titanium dioxide to provide pigments for paints, plastics and paper, has come to a standstill.
Iluka collected $662.8 million in the six months to June 30 from its sales of mineral sands, up 16.2 per cent from $570.2 million for the same period last year.
High prices and strong margins have kept revenues rising, with the company reducing production of its chief earners zircon, rutile and synthetic rutile to deal with lower demand.
The company reduced production of the three products by 23 per cent to 444,000 tonnes in the first six months of 2012, and by four per cent to 217,000 tonnes in the three months to June 30 compared to the previous quarter.
Thursday’s quarterly production report showed a 35.1 per cent fall in sales of those items to 273,900 tonnes.
Iluka surprised the market earlier this week with a sharp sales downgrade for the year, saying it expected to sell between 510,000 and 720,000 tonnes of zircon, rutile and synthetic rutile in calendar 2012, compared to its May estimate of 935,000 tonnes.
More than $1.1 billion, or a quarter of the company’s market value, was wiped off its share price following the news.
After recovering for two days, Iluka’s shares closed fell again on Thursday, closing 29 cents or three per cent lower at $8.98.
