Amplats reports lower earnings due to Covid disruptions


Amplats reports lower earnings due to Covid disruptions

Published Date: 2020-07-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

Amplats reports lower earnings due to Covid disruptions

The platinum producer says its second half should be stronger, although significant risks and headwinds still exist.

Anglo American Platinum has reported a dip in first-half profit after it lost production due to Covid-19, Eskom power outages and repairs to some of its units. However, it says strong prices for its metals supported a solid financial performance.

The platinum producer said it lost 585,000 ounces of production in the six months to end-June as national lockdowns affected its mines in SA and Zimbabwe. Refined production of platinum group metals (PGMs) was also affected by temporary shutdowns at two of its Anglo Converter Plant (ACP) converter units in Rustenburg following an explosion at one and a water leak at the other. The average realised basket price for its metals was 56% higher at $1,956 for the period. Combined with a 15% weakening in the value of the rand, the rand basket price jumped 80% to R32,166 per PGM ounce.

Total PGM production, including joint ventures and third-party purchases, fell by 25% to 1.62 million ounces year-on-year in the six months to end-June, mainly due to the impact of the lockdown. At the end of June, production levels at the group's managed operations were back at 80% of normal capacity and it expected this to rise to 95% by the end of the year. Total refined production, including tolling, declined by 46% to 1.25 million ounces as the temporary closure of the ACP and load shedding in the first quarter of the year impacted production.

Revenue for the six months increased by 28% to R54.8 billion. In line with the 25% decrease in mining production, the unit cost of production per PGM ounce increased by 26% to R12,555. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 5.7% to R13.1 billion. Headline earnings fell 7% to R6.9 billion and were also 7% lower on a per share basis at R26.27. It lowered its dividend by the same margin to R10.23 per share. It ended the period with net cash of R11.3 billion, up from R6 billion a year earlier.

Amplats targeted full-year production of between 3.1 and 3.6 million ounces, with refined production and sales volumes expected to be in the same range. While PGM demand would be impacted by the decline in global car and commercial vehicle sales and production, weaker sales of platinum jewellery, and softer industrial demand, it expected platinum, palladium and rhodium to remain in deficit this year due to lower mine supply as a result of Covid-19.

Amplats said it expected a stronger second-half performance, although significant risks and headwinds still existed including the impact of Covid-19, the repair of its ACP Phase A unit and the potential for load shedding.

Its shares rose 1.5% to R1,454.03 yesterday.

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