Anglo American Platinum, (Amplats) is set to post bumper earnings of up to R19 billion for the full year ended in December as the upswing in the commodity price cycle has seen new records for rhodium and palladium. Supplied
Anglo American Platinum, (Amplats) is set to post bumper earnings of up to R19 billion for the full year ended in December as the upswing in the commodity price cycle has seen new records for rhodium and palladium. Supplied

Anglo American Platinum to post bumper R19bn earnings

By Dineo Faku Time of article published Jan 29, 2020

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JOHANNESBURG - Anglo American Platinum, (Amplats) is set to post bumper earnings of up to R19 billion for the full year ended in December as the upswing in the commodity price cycle has seen new records for rhodium and palladium.

Amplats  said yesterday (Tuesday)  it was likely to post a 151 percent surge in headline earnings and headline earnings per share compared to the prior year  when it reports its 2019 full year financial results next month.

It said headline earnings would likely more than double to  R19 bn compared to R7.8 bn in 2018, the company said.

The group said headline earnings per share would increase to R72.65 cents per share from R28.93 cents in 2018, while basic earnings and earnings per share would likely to increase by between 157 percent and 177 percent respectively.

It said the accelerating metal price environment had boosted earnings and helped it shrug off the impact of  production losses due to Eskom's load shedding.

"The expected increase in headline earnings and basic earnings is primarily driven by a 38 percent increase in the rand basket price and continued steady operational performance,” Amplats said, “notwithstanding the loss in production of 38 000 PGM ounces  and deferred refined production (89,000 PGM ounces to be refined in 2020) due to Eskom power outages.”

Amplats, the subsidiary of global diversified giant Anglo American plc, increased X percent on the JSE following the news.

Last week the company said it had lost 38 000 Platinum Group Metal (PGM) ounces production last year as a result of load shedding.

The group said the losses amounted to R742.3 million in revenue. It said the lost production could never be recovered.

However the group maintained that total output from all own managed operations was robust.

It said production from all owned operations increased by 21 percent increase in output to 675 200 ounces including a 22 percent jump in platinum production to 310 000 ounces and an 20 percent increase in palladium production to 241 000 ounces.

The PGM basket is led by palladium, which is used increasingly in reducing emissions from petrol motor vehicles, to attempt to reduce the effect on climate change.  

Palladium hit   US$2 455 an ounce yesterday up from US$1 051 an ounce two years ago, and is expected to see significant further price growth.

Seleho Tsatsi, an investment analyst at Anchor Capital said 2019 had been a strong year for PGM producers including Amplats.

“2020 is currently shaping up to be better because prices have moved since 2019. “Palladium is 23 percent higher in 2020," said Tsatsi adding that  PGM basket pricing was strong, and was a big factor rather than volumes.

"We expect strong earnings to be reported across the sector" said Tsatsi.

In 2018 the price of  basket of metals increased by 13 percent resulting  in Amplats increasing its dividend pay-out ratio to 40 percent of headline earnings. Amplats'  free cash flow from operations increased by 60 percent to R5.6 billion in 2018 and it also reported R2.9 bn  in net cash.

Rene Hochreiter a mining analyst at NOAH Capital Markets,   said that Anglo American Platinum's 2019 financial numbers were expected given the palladium and rhodium prices rally.

"It is perfectly in line with our expectations," he said

BUSINESS REPORT 

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