KUMBA Iron Ore has held up well during the first six months of 2013 against deteriorating market conditions and the lingering effects of the strike in 2012, and has maintained its profit levels and increased the interim dividend.

The group reported a taxed profit of R10.2bn for the six months to the end of June (level with the previous comparable period) and raised its interim dividend to R20.10 per share (from R19.20 per share before).

A key factor was the effect of the 16% depreciation in the value of the rand against the dollar in the first half of the year, which was partially offset by a 7% drop in iron-ore prices.

CEO Norman Mbazima said Kumba’s total sales for the six months dropped 5% to 22.1-million metric tonnes from the record 23.4-million tonnes achieved in the first half of 2012. Despite this, Kumba’s overall revenue increased 4% to R26.3bn.

Export sales were down 3% at 20.1-million tonnes (20.7-million tonnes), while domestic sales were down 25% at 2-million tonnes (2.7-million tonnes).

Mr Mbazima said global crude steel production increased 3% to 787-million tonnes in the first half of 2013 (766-million tonnes) with Chinese production up 8% to a record 385-million tonnes.

He added: "However, faced with strong pressure on steel margins, Chinese steel mills reduced iron-ore inventory levels and, as a result, demand for seaborne iron ore grew at a slower pace than crude steel production.

"Average prices in the first half of 2013 were marginally down and averaged $137/tonne for the period ($142/tonne)."

Mr Mbazima said steel market fundamentals remained under pressure as the Chinese economy slowed down.

He said: "Iron-ore prices are expected to remain under pressure as supply exceeds demand in the second half of the year, though restocking by steel mills may support prices in the near term.

"Kumba’s main objectives remain to satisfy domestic demand and fill the iron-ore export channel to optimise exports. The export capacity on the rail line is approximately 42-million tonnes and will remain so in the near future."

Asked about Kumba’s plans to diversify into iron-ore production in West Africa, Mr Mbazima said the group "hoped to make progress in the near future" but would not be more specific.

He added: "West Africa is a difficult environment right now. Most of the people who are there are running away. The juniors are still there but their balance sheets look distressed."