Amplats expects to report big earnings slump
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.
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.