Am­plats ex­pects to re­port big earn­ings slump

The Star Early Edition - - COMPANIES - Di­neo Faku

THE WORLD’S big­gest plat­inum pro­ducer, An­glo Amer­i­can Plat­inum (Am­plats), said yes­ter­day that it would re­port a huge slump in earn­ings for the half year to June amid the strength­en­ing of the lo­cal cur­rency.

Am­plats said it ex­pected head­line earn­ings a share for the six months ended June 30 to be at least 20 per­cent (R329 mil­lion or 126 cents a share) lower than the re­stated R1.65 bil­lion and 629 cents re­spec­tively recorded for the six months ended June 30, 2016.

The mine said it also ex­pected to re­port basic earn­ings and basic earn­ings a share 20 per­cent less, at R312m or 118c a share, com­pared to the re­stated basic earn­ings of R1.54bn and basic earn­ings a share of 589c re­spec­tively in June 30, 2016.

“The ex­pected de­crease in head­line earn­ings and basic earn­ings is pri­mar­ily a re­sult of the stronger rand,” the com­pany said yes­ter­day.

The dol­lar, which was bid at R12.9252 by 5pm yes­ter­day, af­fects rev­enue, be­cause most costs in min­ing are rand based, but rev­enue is set by a com­bi­na­tion of the US dol­lar metal prices and rand and the dol­lar ex­change rate.

Am­plats said the rand price for met­als had trended at the time when in­put costs con­tin­ued to rise by much more than the inflation rate.

Hurbey Gelden­huys, head of re­search and a plat­inum an­a­lyst at Vu­nani Se­cu­ri­ties, said that the lower earn­ings were not a sur­prise due to low prices.

“The bas­ket price that the plat­inum group met­als (PGM) min­ers re­ceive has been low for some time now. Th­ese are things that im­pact on rev­enue,” Gelden­huys said.

Am­plats is ex­pect­ing lower earn­ings in line with most other min­ers as 50 per­cent of South Africa’s plat­inum in­dus­try is un­der wa­ter amid the weak plat­inum price en­vi­ron­ment and sub­dued de­mand for plat­inum from Euro­pean car mak­ers and Chi­nese jew­ellery.

“I have no doubt that if the bas­ket price of plat­inum re­mains weak and the rand con­tin­ues to strengthen, the plat­inum in­dus­try will be dec­i­mated. Com­pany bal­ance sheets are weak­en­ing, and most com­pa­nies have al­ready cut most of the costs they could. The only op­tion that re­mains is for com­pa­nies to con­sol­i­date,” said Gelden­huys.

Am­plats said it main­tained its pro­duc­tion guid­ance dur­ing the pe­riod de­spite tech­ni­cal prob­lems which led to de­lays.

The com­pany said a sec­ond con­verter plant (Phase B) was heated up and re­turned to steady state pro­duc­tion on June 14.

“The time re­quired to re­heat Phase B cre­ated a build-up of work-in-progress ma­te­rial which will de­lay about 90 000 ounces of re­fined plat­inum pro­duc­tion from the pe­riod into the sec­ond half of 2017,” the com­pany said.

“There is no im­pact to ful­lyear pro­duc­tion, with guid­ance main­tained at metal in con­cen­trate pro­duc­tion of be­tween 2.35 to 2.40 mil­lion ounces,” it also said.

Am­plats ex­pects to re­lease its in­terim fi­nan­cial re­sults on July 24. Am­plats shares eased 0.11 per­cent on the JSE yes­ter­day to close at R288.09.

PHOTO: DUMISANI SIBEKO

An­glo Plat­inum’s Mo­galak­wena Mine. The weak plat­inum price en­vi­ron­ment and sub­dued de­mand for the metal from Euro­pean car mak­ers and Chi­nese jew­ellery puts the coun­try’s PGM mines un­der pres­sure.

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