RBPlat embarks on a restructuring and right-sizing exercise

ROYAL Bafokeng Platinum (RBPlat) has embarked on a process to restructure and right-size the overhead and operational structure of its business to be appropriate for the current and future market environment.

It said during the presentation yesterday of its interim results for the six months ended in June that it would reduce output and withhold spending plans to preserve cash amid depressed commodity prices.

The restructuring strategy would also include reducing the fixed cost base in labour and the enhancement of the quality of the revenue stream.

“The revenue enhancement will be achieved through the closure of the non-profitable South shaft UG2 production sections and redeploying 60 percent of the UG2 mining crews to superior-margin Merensky at South and North shafts and UG2 production at North shaft,” the company said.

“This will enable us to maintain current levels of platinum group metal production, but with the enhanced effect of the base metals revenue that accompanies Merensky production and optimised processing arrangements equating to about R37million per annum.”

RBPlat announced that it successfully raised R1.2 billion through the placement of convertible bonds and secured R2bn debt facilities during the period.

But the group said it incurred a headline loss of 15.3 cents a share for the period compared to a headline profit of 77.8c a share during the same period last year.

RBPlat said the main reasons for the regression to a loss per share were a 9.8 percent lower realised average rand basket price for the period and a once-off restructuring charge of R57.1m.

Net revenue decreased by 3.2percent from R1 646.9m in the first half of last year to R1 593.9m for the first half of this year while the average cash operating cost per platinum ounce increased 0.2percent from R15 882 to R15 913 due to a 7.3 percent rise in platinum ounce production and a 7.5percent increase in cash operating costs.

“Our gross profit margin reduced from 11.4percent… to 0.7 percent. This was due to the 3.2percent decrease in net revenue and an 8.5percent increase in total cost of sales,” the group said.

Depreciation and amortisation charges included in the cost of sales were R15.9m higher than those of the comparative period last year due to increased production. Earnings before interest, tax and depreciation and amortisation a percentage of revenue decreased from 18.5 percent to 6.3 percent in the first half of this year mainly as a result of the decreased revenue and restructuring costs.

RBPlat said it had cash and near cash investments of R1 664.5m during the period, R67.7m of which was ringfenced for the housing project and R420m earmarked for the settlement of the convertible bond coupon.

“Our total cash operating costs increased by 7.5 percent from R1329m to R1429m when compared to the first six months of 2016, in line with the increased BRPM volumes and inflation related increases,” the group said.

RBPlat shares rose 2.54 percent on the JSE yesterday to close at R31.47.