Iluka cuts jobs and reduces production

MINERALS sands miner Iluka will cut production after tough trading conditions led to a drop of nearly a third in revenue in 2012.

Iluka's Eneabba operations in Western Australia's mid-west region will be closed, costing 65 jobs. Other operations in South Australia, Victoria and in the United States will be closed or operate on reduced rosters.

The company blamed tough conditions, saying the ageing WA mine had been reactivated in 2011 when demand for zircon and titanium dioxide was high.

"With recent challenging economic conditions globally, demand for these products has reduced," Iluka's general manager of Australian operations, Steve Wickham, said.

He said Iluka told customers and employees throughout 2012 that it would take appropriate measures - such as cutting production and costs - to match production to demand.

That worked in the first half of the year when it lifted margins and revenue by 16.2 per cent to $662.8 million, despite a near one-third drop in sales.

It appears to have run out of options in the second half with full year revenue falling 30.4 per cent to $1.07 billion. Sales fell 58 per cent in the December quarter to $182.5 million.

It blamed a "cyclical low" for the lack of demand for its products, which are used in ceramics and paints. Iluka told the market before Christmas that sales volumes would be at the bottom end of guidance after sales of rutile, which is used to make titanium dioxide, had nearly dried up.

Prices have fallen by 25 per cent to 35 per cent as demand has fallen due to weak property markets, especially in China and the US.

Iluka shares responded positively to news of the job cuts, rising 38¢ to $9.76 on Thursday.

But the share price is still half of the $18.88 price that was being fetched in January last year, when prices were booming.

It said it would provide specific guidance on production levels and costs when it reports its results next month, but signalled more production cuts were planned.

"Iluka begins 2013 with inventory levels that are capable of being drawn down to meet demand before restoring production settings to match more typical underlying demand conditions," it said.

Iluka is the world's largest supplier of zircon, with more than one-third market share, and rutile.