DRDGold expects up to 20% drop in earnings

File photo: Petr Josek.

File photo: Petr Josek.

Published Aug 23, 2016

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Johannesburg - DRDGold expected to report earnings per share to decline by up to 20 percent for the year to June, the JSE-listed firm said yesterday.

Read also: Gold's revival gives life to SA fund

DRDGold, with a market capitalisation of R3.9 billion, declined 16.36 percent to R9 a share yesterday, leading a rout among mining stocks.

It said earnings a share were expected to be between 14c and 15.3c a share, which represented a decrease of 12 percent to 20 percent, respectively, compared with 17.4c a share for the previous corresponding period.

The company attributed the decrease to non-recurring items that contributed approximately 5c a share more to the corresponding period. It said the specific items were excluded from headline earnings.

It expected headline earnings a share to be between 12.2c and 13.3c, which represented an increase of 23 percent to 34 percent, respectively, compared with 9.9c for the previous corresponding period.

Sibonginkosi Nyanga, an analyst at Momentum SP Reid, said the market was expecting a strong financial performance from DRDGold as the rand had weakened and the gold price had firmed in the period under review.

“We should be asking why are earnings up by between 23 percent to 34 percent considering that the rand weakened by above 20 percent against the US dollar during the period under review,” Nyanga said.

Share buy-back

Nyanga also noted that the market would be looking at the company’s share buy-back scheme, which it had previously flagged.

DRDGold, which opened its R389 million state-of-the-art­flotation and fine-grind circuit at the Ergo plant, revised its production guidance in the year to September 2015 from 145 000 ounces to 155 000 ounces from its 11.8 million ounce resource.

The company also concluded a load-curtailment agreement with Eskom, in terms of which it would reduce power consumption by between 10 percent and 20 percent when the grid was under pressure, in 2015.

DRDGold posted a 13 percent increase in gold production in the year to September, while operating profit was up 48 percent to R384.3m on the previous year.

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