Earnings call transcript: Rana Gruber AS Q2 2025 sees revenue drop

Rana Gruber AS reported a significant decline in its financial performance for Q2 2025, with revenues dropping to NOK 327 million from NOK 547 million in the same quarter last year. The company’s adjusted earnings per share (EPS) also fell sharply to NOK 0.94, compared to NOK 3.71 a year ago. The stock reacted negatively, with a 2.56% decrease, closing at NOK 70.5. Despite these challenges, InvestingPro data shows the company maintains a strong financial health score of 2.97 (GOOD), with an impressive gross profit margin of 72.95%. The company cited a challenging market environment, particularly in the European steel industry, as a key factor in its performance.

Key Takeaways

• Revenues decreased by 40.2% year-over-year.
• Adjusted net profit declined to NOK 47 million from NOK 137.4 million.
• Iron ore prices remain volatile, affecting profitability.
• The company plans to start FE65 production by the end of 2025.

Company Performance

Rana Gruber AS experienced a challenging quarter, with a notable decline in revenues and profits compared to the previous year. The company’s performance was impacted by a volatile iron ore market and a slowdown in the European steel industry. Despite these challenges, Rana Gruber is focusing on improving its product quality and efficiency to strengthen its competitive position.

Financial Highlights

• Revenue: NOK 327 million, down from NOK 547 million year-over-year.
• EBITDA: NOK 92.5 million, a decrease from NOK 205 million.
• Adjusted Net Profit: NOK 47 million, down from NOK 137.4 million.
• Adjusted EPS: NOK 0.94, compared to NOK 3.71 last year.

Market Reaction

The stock price of Rana Gruber AS fell by 2.56% following the earnings release, closing at NOK 70.5. This decline reflects investor concerns over the company’s reduced earnings and the challenging market conditions. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, while offering an attractive dividend yield of 9.32%. The stock trades at a modest P/E ratio of 6.9, suggesting potential value opportunity. For detailed valuation metrics and additional insights, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, Rana Gruber remains committed to its strategic goals, including the production of FE65 by the end of 2025 and maintaining long-term cash costs between USD 50-55 per tonne. InvestingPro forecasts indicate a 3% revenue growth for FY2025, supporting the company’s expansion plans. With a market capitalization of $263.65M and strong cash flows sufficient to cover interest payments, the company appears well-positioned for its infrastructure investments. Despite the current market challenges, Rana Gruber is exploring potential expansions into Asian markets. InvestingPro subscribers can access 6 additional key insights about the company’s growth potential and financial stability through the platform’s exclusive ProTips feature.

Executive Commentary

CEO Gunnar Moo emphasized the company’s ongoing efforts to adapt to the evolving demands of the steel industry, stating, "We continue to make progress towards our ambitions, steadily improving our business." CFO Arren Heijn highlighted the importance of maintaining cost discipline and increasing the company’s cash position.

Risks and Challenges

• Volatile iron ore prices could further impact profitability.
• Slowdown in the European steel industry poses demand risks.
• Infrastructure investments may strain short-term financial resources.
• Potential delays in FE65 production could affect future revenue streams.

Q&A

During the earnings call, analysts inquired about the company’s plans to offset the European market slowdown by expanding into Asia. Executives also addressed questions regarding the timeline for infrastructure investments and the expected impact on cash costs. The company reiterated its commitment to achieving its strategic objectives despite the current challenges.

Full transcript - Rana Gruber AS (RANA) Q2 2025:

Gunnar Moo, CEO, Erangruber: Hello, everyone, and welcome to this presentation of Erangruber’s Results for the Second Quarter and 2025. My name is Gunnar Moo, and I am the CEO at Erangruber. With me today is our CFO, Arren Heijn. We will now take you through our operational and financial performance, and you are welcome to send us questions during our presentation by using the Q and A feature. Questions will be answered at the end of the session.

The strong production trend from previous quarter continues, both at the mine site and at the processing plant. Concentrate production reached 440,000 tonnes in the quarter and 913,000 tonnes in the first half, both well above last year’s performance. Iron ore prices has remained volatile and softened at the end of the quarter of the second quarter, which directly influenced our revenue recognition. Revenues for the quarter landed at NOK $327,000,000, below last year’s NOK $547,000,000. Cost discipline is important in a volatile market.

Cash costs declined in absolute terms and on NOK per tonne basis, but the strong Norwegian kroner versus our cash cost target level resulted in a reported cash cost of USD 61 per tonne produced. Preferations at Steens and Syan are progressing according to plan, ensuring operational readiness for the transition from Utfjell open pit mining to new production by year 2025. The project underpins Herrano Guber’s strategic goal of increasing magnetite production and strengthening long term competitiveness. As part of this development, the Board has decided to move forward with infrastructure investments at Stolfe Forschein. The investment will be financed with long term infrastructure loan backed from Exfin as well as expected public support.

The investment is expected to be paid back over Steens Neuquen’s lifetime. Danagubel continues to return capital to our shareholders. With the Board of Directors resolving to declare a quarterly dividend of NOK0.66 per share for the second quarter. The dividend represents 70% of adjusted net profit. In the first quarter, we recorded one minor injury, which led to a short absence.

The employee is back at work, and this reminds us that safety must remain a top priority in everything we do. In June, we carried out our annual maintenance stop, completing up to 400 work packages. This was a large and complex effort involving both internal staff and external contractors. Importantly, all of this work was completed without any incidents, which is a strong achievement and shows the value of our systematic focus on safety and planning. Going forward, we will continue to strengthen our safety culture to ensure that everyone who works at Donaghuebl returns home safely every day.

The second quarter confirmed the positive trend from our previous quarters with solid production of both hematite and magnetite, in line with our expectations. Looking ahead, magnetite volumes will increase further as Stensenchen comes on stream. In a volatile iron ore market, improving quality and efficiency is critical. I’m therefore very pleased with the strong progress in underground production in recent months, which strengthens our flexibility and ability to deliver iron ore at a competitive cost. Now I will hand over to our CFO, Arren Hayen, who will present the financials.

Arren Heijn, CFO, Erangruber: Thank you, Gunnar. Starting with the revenue side of the P and L as usual. As you can see on the graph on the right hand side, second quarter revenues decreased from the second quarter in twenty twenty four and ended at NOK $327,000,000. The main reason for the decrease is linked to price effects and volumes sold within the quarter. Foreign exchange and shipping costs also contributed negatively this quarter, partly offset by a positive contribution from our Mainetite sales.

From the graph in the middle, you can see that realized prices for Mainetite has have been increasing for the last quarter, while hematec prices have declined compared to the previous quarter. Revenue per tonne for magnetite appears particularly high for this quarter, and that is mainly due to more sales under CIF contracts this quarter, where the corresponding freight costs are booked on the cost side. Moving over to the cost side. Cash costs in absolute terms went down, both compared to previous quarters as well as the corresponding quarter last year. And measured in cash cost per tonne in Norwegian currency.

This quarter also showed improvements compared to last year’s second quarter. Due to the second quarter maintenance stop, the second quarter normally stands out on a cost per tonne basis. And although the $61 per tonne is above our long term cash cost target, we are confident that we will achieve our target on a long term basis. And the currency changes during the quarter also puts pressure on our dollar target, but this effect has slightly improved entering into the third quarter. In line with IFRS, most of the maintenance costs related to the annual maintenance stops also must be classified as OpEx, also affecting capital in the quarter.

Financial performance, the normal business slide, with some comments on some of the numbers. EBITDA decreased from NOK 92,500,000.0 from NOK $2.00 5,000,000 last year, mainly linked to the effects on the revenue side. In the second quarter, the pretax profit was adjusted with negative $19,300,000 related to the unrealized changes in the company’s hedging portfolio, giving us an adjusted net profit of million, down from NOK137.4 million last year. This again gives us an adjusted EPS of NOK0.94 compared to NOK3.71 last year. And by following our dividend policy, the Board decided to pay out NOK0.66 in dividend per share for the 2025.

Moving over to cash flow. The total net cash flow from operations in the second quarter amounted to positive 47,000,000. Included in this is a tax payment of NOK 44,000,000. CapEx for the period amounted to NOK 52,000,000, mainly related to the mine level, level 91 as well as our new mining level, Level 59, which we have started developing as well as some smaller installations in the FE65 and minor type circuit. Of financial activities, 47,000,000 was paid out of dividends for the first quarter and NOK 14,000,000 was payment of the principal portion of our lease liabilities.

All in all, this gives us a negative change in cash of million for the second quarter. Ending the financial review by looking at our financial position. We continue to hold a solid financial position, but there is a slight reduction in cash and cash equivalents compared to the first quarter, mainly caused by payment of income tax, dividends and investments. After the dividend distributions for the 2025, our equity ratio was 61.2%, where part of the uplift this quarter as well is related to further strengthening of the unrealized value of our hedging portfolio as well as the leasing debt being reduced to NOK $282,000,000 within the quarter. By the end of the first quarter, nay, the second quarter, the total cash holdings was 27,000,000.

And that concludes, I think, the financial section.

Gunnar Moo, CEO, Erangruber: I will

Arren Heijn, CFO, Erangruber: leave you to the last words. Good night.

Gunnar Moo, CEO, Erangruber: Thank you, Arlen. To sum up, we continue to make progress towards our ambitions, steadily improving our business to meet the evolving demands of the steel industry. While we are focused on developing our operations for the future, we remain committed to maintaining cost discipline. Our strong balance sheet, solid partnerships and skilled team give us the ability to navigate volatile markets with confidence. We are on track to deliver iron ore concentrate with a 65% grade N to increase magnetite production.

I’m also pleased to highlight that we have now achieved 18 consecutive quarters of dividend payments. With that, we conclude this presentation and we’ll now open the Floor for the Q and A session. Thank you.

Vega, Moderator/Analyst: Thank you, Arren and Gunnar. For the moment, we actually don’t have any questions, but I will I could start the session by addressing some questions. And I can take the first to you, Gunai. Could you elaborate something more about our Asia shipments going forward?

Gunnar Moo, CEO, Erangruber: Yes, Vega, I can do that. Europe is always our main market. Our goal is always to sell 100% of the produced volume to Europe. Due to a slowdown on steel industry in Europe, that will, for some time, be a little bit difficult. So that’s why we have the backstop linked to the contract with Cargill Metals that gives us the possibility to send some ships to Asia.

So that’s the rationality. So it’s not the first choice, but it’s also always a possibility for us. All in all, that’s a positive thing.

Vega, Moderator/Analyst: Thank you. Still non questions, but, Aaron, could you elaborate something more about the the investment in the infrastructure?

Arren Heijn, CFO, Erangruber: Oh, I’ll you the time. Sure. Yeah. Yeah. I think there are many rationales behind doing the investment at the engine time.

But, obviously, the first one is to mitigate the possible cash cost increase that’s the longer haulage road So that’s one factor that it sort of, like, it pays itself off in that sense. But there is also operational and risk aspect to it as well. Reducing the haulage road over in in winter terrains reduces risks for the employees. But the and as well as having multiple extractions points for the ore down to the processing plant also mitigates risk in the sense of always being in operation and always having ore available.

And I would say the third factor is it’s it’s an a it will be an enabler for the company in a long term sense when looking at mine plan and different possible ore bodies that we can attack for the next ten, twenty, thirty years. So multiple positive effects. Short term, it’s the the, obviously, the cash cost aspect of it. And then long term, there are other benefits, of having this infrastructure, developed.

Vega, Moderator/Analyst: Perfect. Now I see I have got some questions. So, I just take a Can you, Arren, say something about our OpEx and cash cost target, did our OpEx come above our expectations?

Arren Heijn, CFO, Erangruber: I would say no. But but, obviously, it’s above the announced long term target. But I think it’s important to emphasize that the target that we have set of staying between the $50 to $55 on a long term basis will have fluctuations. Same as I think it was Q4 last year, we were below that target. This quarter, we have been above, but we still feel that the target is well within the range of what we are able to do on a long term basis.

But there will be fluctuations. And typically, the second quarter is always the highest quarter on a cash cost per ton basis due to the maintenance stop and the reduction in production due to that. But if you look at the numbers behind the cash costs, we showed improvements this quarter compared both to previous quarter, the first quarter, and, the quarter last year. And the third factor that typically will affect the the sort of, like, announced target in measured in dollar will always be the currency effect. When we set out the 50 to 55 target, that was based on one currency assumptions.

And obviously, on a long term basis, we have to adapt to sort of, like, fluctuations in the in the currency. That’s that’s something that that we obviously understand and and take into consideration. But on a sort of, like, quarter to quarter basis and then on short term basis, that could sort of, like, also move the numbers a little bit around.

Vega, Moderator/Analyst: Perfect. Yunai, what’s your latest estimate when you will be linked to the f e 65 index on the hematite? And if we go further on the 67 project, could you say something about the premium compared to the 65?

Gunnar Moo, CEO, Erangruber: Well, as announced, we are on target with the for the time being of producing 65,000,000 There has been some delay because linked to late delivery of some equipment, but that will be sold quite soon. The FX 65 index and the spread between sixty two and sixty five is quite narrow at the moment. And that is linked to difficult times in the industry. Whether we when we produce 67, which we hope that we will get an approval from the Board and start the change to produce 67, there is very difficult to say what the margin between sixty five and sixty seven will be. We still believe that it will be substantial, but to put any numbers on it will be very difficult.

Vega, Moderator/Analyst: Thank you. I think this goes to you, Arren. A question on the capital structure. Your cash cost cash position has declined from close to $909,103 100,000,000 at the start of last year to 27 now. Could you comment on what you see as a target or a comfortable cash level and a net debt level going forward?

And could you say some of the dividend policy related to this?

Arren Heijn, CFO, Erangruber: Yeah. Good good question, I think. And I don’t think that I will give a firm answer on in in regards of numbers, but I will I I can maybe put some light on it in the sense of what type of directions I think we are sort of looking at. And on the cash level, we would say that being the level that we are now, we are a bit short on cash. We we would like to increase our cash position.

That’s one thing. And on a debt level, we have announced that we will debt finance the infrastructure investment on Saint Vincent, and that was something that we slightly touched upon in the CMD, November that we we see that our equity ratio and our financial position is, continues to to to strengthen itself. And looking at sort of, like, the principle of not having any long term debt whatsoever is something that we have revisited. And and through this infrastructure investment, we find it sensible to finance things like that, using long term debt. But I don’t think I will give for, like, an absolute number for the cash and and the the depth ratio, unfortunately.

But hopefully, some indications on also, like, slightly direction that we’re going.

Vega, Moderator/Analyst: Perfect. Going further on CapEx, you said that the infrastructure investment is on top of already announced the CapEx program.

Arren Heijn, CFO, Erangruber: But we

Vega, Moderator/Analyst: got the questions that production level 59 of 100 per year is that on top of already announced CapEx program?

Arren Heijn, CFO, Erangruber: No. That’s based on the installed capacity that we have internally at our company. So, the start of Level 59 is is being done with the same people and same equipment that we have installed in the 100,000,000 NOK in in internal cost. So that’s just an allocation of internal resources between the different levels. So, no, it will not be on top of that.

It will be a continuation of the 100 going forward with the installed capacity that we have.

Vega, Moderator/Analyst: It looks like the the investment in the infrastructure had some interest. Could you say something about concrete? What what are we going to do? Yeah. Sure.

Arren Heijn, CFO, Erangruber: There will be installation of a new crusher, and we will refurbish the old silo system that we used up until, I think, was mid eighties. There is an already existing tunnel and and railroad bridge that we are able to use part of, and we will extend that tunnel as well, enabling us to move all of the 40 plus wagons that we have. So it will basically be crusher renovation of silo and and tunnel system, development of more tunnels and refurbishment of the sidetrack and all of the technical things that needs to be done on the railway, as well as refurbishment of our old, bridge crossing the river. So that we will eventually connect to the Norilsk Bahn as we are connected with our existing sidetrack further up the valley.

Vega, Moderator/Analyst: Perfect. And I think this is the last question then. We we said something about it in our report, but, you know, could you elaborate something more about the f s 65? We announced that we were delayed on the last installment and that we will install the last installment now in third quarter. But when do we expect to produce f e 65?

Gunnar Moo, CEO, Erangruber: We expect to produce FE65 at the end of this year. The 2025, we will be quite sure that we will produce a large volume of FE65. So that’s the time line, and everything looks promising as soon as all the last equipment will be installed. We’re quite sure that we will reach that level. We are very close at the moment, by the way.

Vega, Moderator/Analyst: Thank you. I think that was all the questions. So with that, I will leave the word Jonas, who will take the final remarks.

Gunnar Moo, CEO, Erangruber: Yes. I will have the possibility or the to introduce that we have the next presentation and capital markets update on the November 12. And I will welcome you all there and hope for a good autumn and a happy future for us all. So see you then.

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