Johannesburg - Anglo American Platinum (Amplats), the world’s largest platinum producer, yesterday said it was expecting headline earnings to drop by between 50 percent and 70 percent for the half year to June compared with the corresponding period last year as the result of stock adjustments in the previous year and soft prices for the metal.
Amplats, a subsidiary of Anglo American, said headline earnings would decline to between R745 million and R1.235 billion and to 285c to 470c a share from R2.471bn and 945c in the previous year.
The company said basic earnings a share would drop by between 54 percent and 74 percent to between R645m and R1.1bn and to 245c to 430c per share compared with the previous period’s basic earnings of R2.4bn and 936c a share.
The JSE-listed firm said the drop was mainly due to an adjustment of its inventory level in the previous period that resulted in an after-tax gain of R1.6bn or 599c a share.
Amplats last year benefited from a R1.6bn gain from its annual count of its metal inventory, less than the R424m figure for this year, it said.
“The expected decrease in basic earnings and headline earnings is primarily due to a higher inventory gain in the comparative period, arising from the annual inventory count (equating to a gain of R1.6bn or 599c a share after tax) which was substantially higher than the inventory gain in the current period (equating to a gain of R424m or 162c per share after tax),” the company said in a statement yesterday.
“In addition, basic earnings and headline earnings were negatively impacted by a decrease in dollar metal prices in the current period,” the company said.
The platinum price fell by 6.5 percent in the year to June and has lost more than 40 percent since August 2011 while the price of palladium fell 10 percent in the year.
Major producers, including Impala Platinum and Lonmin, have sold or closed mines, reined in spending and cut thousands of jobs in order to cope with lower prices.
The decisions have weighed on the country’s economic growth, the source of more than 70 percent of the world’s platinum and a country where more than one in four workers is jobless.
The first half of last year also saw a significant ramp-up in output after the Association of Mineworkers and Construction Union led a strike in 2014.
Amplats shares dropped by 3.39 percent to close at R383.52 on the JSE yesterday as the market digested the news.
Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said despite the lower earnings forecast for the half year to June, the market would still be interested in whether Amplats would meet its 2016 financial year production and cost targets.
“We want to see how much free cash flow the group generated from its operations and whether all operations were cash positive or not.
“Amplats announced it would produce between 2.3 million and 2.4 million platinum ounces at R19 750 an ounce.
“If they meet the production targets and control their costs they would have done well. These are the variables that they can control, compared to metal prices,” said Nyanga.
* With additional reporting by Bloomberg
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