In its financial results, Prosperity Minerals (LON:PMHL) reported a 31% increase in revenue to US$849m (FY09: $647.7m) and a 140% rise in pre-tax profit to US$18.5m (FY09: US$7.7m). The newly re-focused iron-ore trading business had a particularly significant year, in which it re-positioned itself following the disposal of the majority of its Chinese cement business.
For the twelve months to 31 March 2010, the company reported a 2% decline in total earnings (EBITDA) to US$43.5m (FY09: US$44.3m), however on a ‘per share’ basis, basic earnings were up at 8.4 cents (FY09: 3.7 cents). Prosperity has also proposed a significant increase to the final dividend, to 9 cents per share (FY09: 1.7 cents)
"We were rewarded this year with the very successful sale of our cement business to TCC International Limited (TCCI) for HK$3.8 billion (approximately US$500 million) in cash ... Over four years, we created one of the leading cement players in the PRC through a number of timely investments and acquisitions, which galvanized its value, a fact recognised by TCCI,” Prosperity chairman and chief executive David Wong commented.
Subsequently, Prosperity has been increasingly focused on its iron-ore business, which is reflected by the 80% year-on-year increase in the total tonnage shipped to 7.9m tonnes (FY09: 4.4m tonnes). However, the company acknowledged that whilst trading volumes have grown substantially, profit per tonne was lower than the previous financial year, “due to continued volatility in the market and a substantial drop in iron ore prices in the first half of the year. Prosperity noted that it had shipped most of the iron ore during this period.
In the current financial year, following the completion of the cement business sale on 30 April 2010, the company has made rapid progress in terms of its new ventures.
In May, Prosperity bought back into Liaoning Changqing - a formerly-controlled subsidiary of the disposed cement business - through a deal with a former joint venture partner. With a £10m investment, Prosperity will take its former partner's place in a joint venture with TCC.
Liaoning Changqing began trial production of a new 2 million tonnes per annum clinker production line in April 2010 and full production is expected to commence in September 2010. In May, the company said that it expects to have an opportunity to sell the stake in Liaoning Changqing, at a higher valuation once normal production is established at the Liaoning plant.
In June, the company announced its plan to move into the Chinese real-estate market. “[Real-estate] is a market with which the Prosperity team is already very familiar ... in addition to our iron ore trading operations we intend to act as a specialty real estate developer in China, focusing only on prospectively profitable projects in prime or promising locations with good cash flow.”
“It is not the company's aim to become the biggest property company in the PRC but to be one of the most profitable; and I believe we have the capability to achieve this.”
On the 1 June 2010, Prosperity told investors that it had established a property development and investment division. The new business has already entered into agreement in relation to two separate property investments - in the Fujian Province in south-east China and in Guangzhou City.
According to Prosperity, the PRC’s long term urbanisation plan brings increased demand for high-quality housing in China’s cities.
Alongside the announcement, on 1 June, Prosperity revealed the terms of a significant new iron ore master off-take agreement with Grace Wise Pte Ltd, to purchase ore from Malaysia. The three-year off-take deal sees maximum trading volumes capped at 1.5m metric tonnes in FY11, 2.5m metric tonnes in FY12 and 4m metric tonnes in FY13.
In terms of his outlook, Prosperity CEO Wong concluded: "I believe Prosperity is strongly positioned and able to grow the business and to continue to increase value for shareholders."