HIGH inflation in Bulgaria and Hungary pushed down operating profits at Navan Resources to $860,000, despite an increase in turnover of more than 70 per cent to $26 million.
However, the group reported pre tax profits of $5.6 million after exceptional gains and interest income for the year to last December, compared to $1.8 million the year before.
The impact of inflation on margins in Bulgaria, where Navan has a 68 per cent interest in a gold and copper mine, was particularly acute, according to the chief executive, Mr John Cook.
Sales from the Bulgarian operation are in dollars while cost are incurred in the local currency, the leva, which was held steady against the dollar by the Bulgarian authorities despite inflation of almost 40 per cent.
Navan derives around 54 per cent of turnover from the Bulgarian operation with the bulk of the remainder coming from its industrial minerals operations in Hungary. Profits are split along similar lines, according to Cook.
The impact of inflation on margins in Hungary was less extreme as sales and costs are incurred in the local currency, the forint. Inflation was around 30 per cent and the currency devalued by around 22 per cent during the period.
Inflation in Hungary topped 100 per cent over the last three years. Under approved accounting conventions Navan revalued its assets in the country to take account of this. The result was an exceptional gain of $4 million which boosted the final pre tax profit figure to $5.6 million.
Undiluted earnings per share for the year to last December were 5.64 per cent, compared to 1.78 per cent previously. Navan shares were unchanged at 193p in Dublin.
During the year the US mining company Homestake paid $24 million for a 10.25 per cent stake in Navan and an option to acquire half of the company's interest in Chelopech. Last March the company said it intended to exercise its option this year at a cost of $48 million.
The company has adequate resources going forward, including cash balances of almost $20 million, said Mr Cook. However, it will be negotiating further debt facilities with its banks this year to meet expenditure requirements from 1997 onwards.
Turnover from the group's Spanish and Irish operations was virtually nil. The company has copper and zinc deposits in Spain and exploration programmes in Ireland, Spain and also Bulgaria.
