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By Jamil Hussein

Date: Thursday 21 Aug 2008

LONDON (ShareCast) - Ferrochrome producer ENRC rejected the suggestion that Kazakhmys should have a seat on its board as it posted maiden profits of $2.04bn

Last week, Kazakhmys lifted its stake in ENRC to 25% to become the largest shareholder in the group and said it would like to be represented on the board.

But Kazakhmys chairman David Cooksey rebuffed the suggestion today. “As competitor for resources in Kazakhstan, we do not believe that it is in the interest of all shareholders that Kazakhmys should have a seat on the Board of ENRC, and hence have any significant influence in ENRC's strategic or operating decision making process.”

Although the relationship between the two groups has been acrimonious, traders have speculated that a merger is likely. The government of Kazakhstan has a stake in both companies and many feel it could arrange a deal.

Earlier in the year, a bid from ENRC for Kazakhmys was rejected while Kazakhmys has slowly built its stake in ENRC but officially said it is not interested in making an offer.

ENRC, which listed in London last December, saw pre-tax profits for the half-year surge 249.1% to $2.04bn on revenue that increased 86% to $3.4bn.

A maiden interim dividend of 12 cents per share was announced and the group said going forward it anticipates a payout range of approximately 15%-20% of earnings.

The group said record ferroalloys prices are expected to hold, though it did warn against continued cost pressures through the second half of 2008. Costs of raw materials rose strongly, exacerbated by the high rate of inflation in Kazakhstan, which reached 20% for the first half of 2008.

“Despite macroeconomic uncertainties, we expect higher commodity prices to hold. We anticipate a very strong performance from the group in the second half of 2008,” said the group.

• News Channel