Nyrstar (NYR.BR), the world's biggest producer of zinc, reported a 73 percent drop in 2008 underlying core profit due to plummeting zinc prices and production cuts and said this year would be very challenging.

 The effects of the sudden and severe downturn in the global economy in the second half of 2008 are expected to persist throughout the year, Nyrstar said in a statement on Friday.

 It confirmed that it would not pay a dividend for 2008.  Nyrstar said that the response from the zinc industry to the downturn had been encouraging when compared to previous downturns, and expected production cuts to support zinc prices in the near to medium term.

 Zinc futures prices MZN3 ended 2008 at around $1,200 per tonne, about half the level of 12 months earlier.  The group said it would continue to implement further transformational changes across the business in order to reduce costs and preserve capital.

 Nyrstar has already suspended operations at its Balen plant in Belgium until mid-2009, cut output at its Budel plant in the Netherlands, and slashed output at its Clarksville plant in the U.S. in response to deteriorating market conditions.

The group, a joint venture which combines the zinc smelting assets of Belgium's Umicore (UMI.BR) and Australia's Zinifex ZFX.AX, said underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 73 percent to 153 million euros ($194.8 million).

 A Reuters poll of five analysts produced an average expectation of 159.9 million euros.

 Sales for the full year fell 37 percent to 2.41 billion euros, above an expected 2.38 billion euros. It had a net loss of 595 million euros compared with a 120 million euro profit in 2007.

 That figure included an impairment charge of 575 million euros, triggered by the fall of the company's market capitalisation below its net asset value.

 A 17.7 million euro loss from the sale of its stake in Thai zinc miner Padaeng Industry PDI.BK booked in the first half of 2008, and an additional 40 million euro loss on the sale of its 60 percent stake in Chinese joint venture Yunnan Zinc Alloys, further contributed to last year's net loss.

 (Reporting by Antonia van de Velde) © Thomson Reuters 2009 All rights reserved