Sibanye swings to big profit on the crest of strong metal prices
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Sibanye-Stillwater, in tandem with its peers, is reaping bumper profits on the wave of the strong gold, palladium and rhodium prices, coupled with the weaker exchange rate.
The group said that it was now in the position to de-risk its balance sheet. “As a result of this strong financial performance, progress on deleveraging the group balance sheet has accelerated, de-risking the business and building a solid base for future delivery of further,” said Sibanye-Stillwater.
Net debt to earnings before interest, tax, depreciation and amortisation had reduced meaningfully to 1.2 times at the end of December 31, 2019, from 2.5 times the year before and well ahead of its 1.8 times target for the 2019-year end, said the company.
In addition to the strong price environment, the inclusion of both the Marikana and DRDGold operations during the year under review had beefed up its balance sheet, it said. Sibanye acquired the Marikana operations from Lonmin last year and is the majority owner of DRDGold.
The strong price environment had helped cushion the impact of the cost of the restructuring of the gold and Marikana operations, the wage strike at its gold operations as well as the recognition of a R3.912bn ($271m) fair value loss on the $ convertible bonds.
Seleho Tsatsi, an analyst at Anchor Capital based in Johannesburg, said on Friday that 2019 was a tale of two halves for Sibanye. “The first half of the year included strike action at Sibanye’s gold operations. The end of the strike and the continued rally in platinum group metals (PGM) prices allowed for a very strong second half of 2019. The second half of 2019 revenue was 110 percent stronger than first half revenue,” Tsatsi said.
Output from South African PGM operations had exceeded expectations, despite load shedding towards the end of the year and the integration and restructuring of the Marikana operations. PGM production, including the Marikana operations, was 37 percent higher year-on-year, at 1.60 million ounces. South African gold operation produced 932 659 ounces, including output from DRDGold.
The group expects to report basic earnings per share of 2.5 cents (0.2 US cents) for 2019, which is a 102 percent improvement on the basic loss per share of 110.4c reported for the previous year. It expects a headline loss per share of 40.2c, down 39.5c compared with 0.7c for 2018.
Normalised earnings, increased by R3.79bn to R2.36bn from a R1.437m loss in 2018.
Sibanye's share price gained 6.88percent to close at R42.10 on the JSE on Friday.
* The conversion of the rand amounts into US dollars is based on average exchange rates of R14.46/$ for 2019; R13.24/$ for 2018 and R14.69/$ in H2 2019.