BRUSSELS, July 30 -- Belgium's Nyrstar (NYR.BR: Quote), the world's biggest producer of zinc, reported forecast-beating earnings before one-offs in the first six months, boosted by higher zinc output and first-time profits from mining.
The group has over the past year expanded in mining, which offers higher margins than traditional smelting, buying mines or stakes in them in the United States, Peru and Greenland.
It plans to buy another mine or seal a long-term supply contract for zinc concentrate in the second half of the year, Chief Executive Roland Junck told Reuters on Thursday.
From 2012, Junck said Nyrstar wanted mining to contribute as much as smelting to core profit (EBITDA). It was likely to represent about 35 percent at the start of 2011.
First-half underlying EBITDA (earnings before interest, tax, depreciation and amortisation) tripled year on year to 93 million euros ($121 million). A Reuters poll of seven banks and brokers had produced an average forecast of 89.4 million euros.
With its Belgian Balen smelter back to full capacity, Nyrstar said first-half zinc market metal production rose 22 percent year on year to 530,000 tonnes.
A stronger U.S. dollar helped the group, which generates much of its earnings in dollars while its costs are in euros.
A severe downturn in the construction and automotive markets at the end of 2008 and in 2009 led to lower demand for zinc, which is used to galvanise steel to protect against corrosion, and prices as low as some $1,100 per tonne.
This forced Nyrstar to shut down the Balen smelter and cut back at other plants.
By 1015 GMT, Nyrstar shares were down 0.4 percent at 9.21 euros, against a 0.4 percent rise of the Stoxx European basic resources index .
"The short-term momentum is fading due to stock piles built up in the first half of 2010 and considering that the zinc market should stay in surplus in the second half of 2010," Bank Degroof analyst Bernard Hanssens said.
He added, however, that the mid-and long-term fundamentals remained robust.
Chinese galvanised steel consumption growth slowed in the second quarter of 2010, but ongoing urbanisation and development there would continue to drive long-term growth, CEO Junck said.
Sales in diecast alloys and specialty alloys, used for car components such as seatbelts, had improved thanks to renewed growth in the automotive sector, he said.
Zinc futures MZN3 ended 2009 at around $2,580 per tonne, and are currently trading at around $1,994.
Nyrstar said it was on track to cut annual costs by 75 million euros by the end of 2010 compared with 2008 levels. ($1=.7684 euro)