Eramet plans new measures for nickel unit as losses continue

PARIS (Reuters) - France's Eramet said on Wednesday it would make a fresh effort this year to stem losses at its nickel business in New Caledonia to avoid a cash crunch next year.

Previous efforts to reduce production costs at the SLN unit suffered a setback last year due to higher energy prices, exchange rate effects and protests at its New Caledonian mines, Chairman and CEO Christel Bories said.

"We know that if we don't do anything, if the plan is not implemented and economic conditions remain as currently, we will have a cash problem in 2020," Bories said of SLN.

"We can't continue like that," she told reporters on a results call.

The SLN unit's production cost, or cash cost, of nickel rose to $5.8 a pound in 2018 from $5.1 in 2017 and Eramet said it was now aiming to lower it by $1.3 by 2021.

The group wants to implement in the coming months a recovery plan based on increasing exports of low-grade nickel mineral, adopting new working hours and lowering electricity costs, Bories said.

However, the plan depends on approval from the authorities for extra exports, price negotiations with the local power supplier, and staff backing for working practices, she added.

Strikes against new working hours have added to disruption caused last year by blockades of certain mines in environmental and political protests.

Reporting full-year results, Eramet said its nickel division had recorded a current operating loss of 111 million euros (96 million pounds), with improved market prices offset by higher costs in New Caledonia and an ongoing reorganisation at a nickel processing factory in France.

The group's current operating profit fell to 581 million euros from 608 million euros in 2017. Net profit dropped to 53 million euros from 203 million, partly due to a 65 million euro provision for a quality process review at its alloys branch.

EBITDA core earnings fell 3 percent to 843 million euros, which Eramet said met its guidance for a level in line with 2017.

For 2019, Eramet said it expected EBITDA to again remain little changed, on the expectation growth and productivity gains would offset a recent deterioration in metals markets.

The group will in the first half of this year also take investment decisions on a 500 million euro lithium project in Argentina and a 600 million euro expansion of its manganese mine in Gabon to raise output by 50 percent, Bories said.

(Reporting by Gus Trompiz and Benjamin Mallet; Editing by Kirsten Donovan)