Profit bloodbath at Implats after protracted strike

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Dineo Faku

PROFIT at Impala Platinum (Implats) was expected to slump by up to 75 percent in the year to June following a five-month wage strike at its Rustenburg operations, the company said on Friday.

The world’s second-largest platinum producer forecast headline earnings a share of between 82c and 92c in the half year to June down from R3.30 in the same period last year.

It also expected that basic earnings would decline by between 98 percent and 100 percent a share to between zero and 3c in the year to June 2013 compared to 98c in the same period last year.

“The expected decrease in EPS [earnings per share] is a result of the impact of the above-mentioned factor and includes the add-back of impairments [after tax] for headline earnings calculations of approximately R480 million,” the company said on Friday.

Implats share price fell 1.42 percent to R105.04 on the JSE on Friday.

“The decline in profits for the year to June is bad news and was unexpected by the market,” said Vadim Astapovich, an analyst at London-based VTB Capital.

The country’s three major platinum producers – Implats, Anglo American Platinum (Amplats) and Lonmin – were hit by the longest strike in South Africa’s history that was led by the Association of Mineworkers and Construction Union.

Impala, which owned Zimplats, an operation in Zimbabwe and mines in South Africa, offered to increase wages over the five years by between 7.5 percent and 10 percent a year.

For a company that had 60 percent of its operations hit by a five-month industrial action, this was not surprising, said Sibonginkosi Nyanga, an analyst at Imara SP Reid.

“It [profit decline] was expected, only that we were waiting for the quantum. We suspect that Zimplats had a good year”.

“Unfortunately, Zimplats’ Bimha mine incident will dent Implats’ production numbers. We think that Implats is likely to remain in a negative information cycle in the short term and that will translate to a weak share price performance in the short-medium term,” Nyanga added.

Impala cut its costs and declared force majeure on non-core services and products during the strike.

Capital costs were also significantly reduced and all capital projects, other than 17 Shaft, were stopped. Implats has previously announced that during the strike, operating costs and capital expenditure were curtailed by 67 percent, about R1.9 billion.

Amplats, the world’s biggest producer, was also hit by the strike and previously reported an underlying operating loss of $1 million (R10.6m) compared to the $187m in the first half of last year.

Implats financial results for the year to June are due to be released next Thursday.

The earnings decline at Implats follows Statistics SA announcement that mining production data for June dropped by 5.7 percent year on year.


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