Amplats punished over impairments

Amplats investors battered the shares of the world’s largest platinum producer on Tuesday morning after the company warned of impairments totalling R2.2bn, reduced sales and a drop in interim profit by up to two-thirds.

Anglo American Platinum (Amplats) investors battered the shares of the world’s largest platinum producer on Tuesday morning after the company warned of impairments totalling R2.2bn, reduced sales and a drop in interim profit by up to two-thirds.

By the end of the trading session, Amplats, which is 80% owned by Anglo American, had recovered much of the ground it gave up after investors reacted negatively to the trading update ahead of the release of interim results on Monday, sending the shares to a session low of R303.20 from a R318.20 close on Monday. By late afternoon, the shares had recovered and were trading less than 1% below Monday’s close.

After warning the market at the end of June that its headline and basic earnings would be at least R329m and R308m lower respectively, compared to the same period a year earlier, Amplats gave the market more definitive figures on Tuesday, with the R2.2bn of impairments against sold assets and loans taking a heavy toll.

One analyst called Amplats’ first-half results “messy due to timing effects” and said the headline earnings per share forecast of between 294c and 419c was likely to come in at the lower end of that forecast, pegging his expectation at 300c.

Amplats warned its headline earnings would fall by between R550m and R875m, compared to the restated headline earnings of R1.65bn recorded for the 2016 interim period. Basic earnings were forecast to decrease by between R1.065bn and R1.37bn from 2016’s restated R1.54bn.

Under accounting rules, Amplats had to attribute about R1.9bn of the R2.2bn of impairments to fixed assets or equity accounted investments to basic earnings. The remaining R300m related to a write-down of loans to junior platinum miner Atlatsa Resources and the Bakgatla Ba-Kgafela Community.

Amplats impaired its Union mine, which it is selling, by R900m and its equity interests in the Bafokeng Rasimone Platinum Mine shared with Royal Bafokeng Platinum by R950m. It also impaired its stake in Bokoni Platinum Holdings, a unit of Atlatsa, by R45m.

Amplats said expected headline and basic earnings were also lower “due to a significant strengthening of the rand in the first half of 2017”, and lower sales volumes, which were affected by refined production.

Issues that affected refined production had been resolved and about 155,000 ounces of platinum would be refined in the second half of 2017.

AMPLATS WARNED ITS HEADLINE EARNINGS WOULD FALL BY BETWEEN R550M AND R875M, COMPARED TO R1.65BN