Lean years ahead
Producers’ profits follow depressing resources prices
THE PROFIT EXPECTATIONS of resources producers are even worse than the dismal resources market that Barclays’ Kevin Norrish referred to at the annual Mining Indaba in Cape Town last week. Norrish pointed to the prices of resources that fell even faster over the past six to nine months than in the corresponding period just after the start of the Great Depression at year-end 1929.
The consensus views about resources producers’ expected profits over the next two years – as collected by Thomson Consensus Rating System in the United States – tell of equally dismal prospects. That just again confirms executives’ traditionally reactive behaviour and shareholders’ proactive loss.
Investors should clearly look beyond the record profits just announced by Anglo Platinum for its 2008 financial year and reflect on the future. Angloplat’s announcement it will be laying off at least 11 000 workers and the reversal turnaround of its cash from R4bn to -R8bn – plus a possible rights issue of new shares to supplement its cash – are much more significant for investors than last year’s profits or dividends.
The table shows analysts’ profit predictions for a number of the world’s leading resources producers. Lean years are forecast for 2009 and 2010. It would, of course, be irresponsible of analysts to forecast anything