Steel and mining group Arrium expects strong demand for iron ore to drive further earnings growth after lifting its full year profit 83 per cent.
Shares in the company gained 12 per cent on Tuesday after Arrium, formerly known as OneSteel, made an underlying net profit of $296 million for the year to June 30, up from $162 million a year ago.
Statutory net profit was $205 million, up from a loss of $701 million, the result of restructuring costs.
Arrium said the profit increase was due to growth in its mining business, offsetting weakness in its steel making operations.
The company also achieved an average iron ore price for the year of US$111 per dry metric tonne.
Arrium says it is now benefiting from the Whyalla Port expansion in South Australia and expects iron ore prices to improve in 2014/15.
"The demand for seaborne iron ore will remain strong due to continued growth in crude steel production in China and declining production of higher cost Chinese ores," Arrium said in a statement.
The company is also targeting higher earnings from its mining consumables business.
It expects continued strong demand for grinding media due to high levels of copper and gold production in North and South America.
However, margins from steelmaking are expected to remain under pressure in the first half of fiscal 2015 due to ongoing weakness in domestic and international steel markets.
Arrium cut 120 jobs from its Newcastle steel-making operations in May and June, due to reduced demand for its products from the mining industry but expects to benefit from an increase in sales volumes.
It sold 12.5 million tonnes of iron ore during the year, but expects to reach 13 million tonnes in 2014/15 after doubling capacity at its Whyalla Port.
The company announced an unfranked final dividend of three cents per share, which takes the full year dividend to nine cents, up from five cents a year ago.
Patersons analysts said the share price boost was due to the strong net profit result which was much improved on the $701 million after tax loss suffered in the prior year.
"The mining unit delivered a strong increase in earnings as the full benefits of its recent mining and Whyalla Port expansions flowed through and record export hematite sales were achieved," Patersons said.
But they said earnings for the steel arm were hamstrung by ongoing weakness in domestic demand.
Shares in the company rose nine cents, or 11.9 per cent, to 84.5 cents at 1455 AEST.
ARRIUM'S MINING BUSINESS BOOST EARNINGS
* Net profit of $205m, from $701m loss in 2012/13
* Revenue of $7b, up 2.4 pct from $6.8b
* Final unfranked dividend of 3 cents a share, unchanged.
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