Northam to report record operating profit


Northam to report record operating profit

Published Date: 2019-02-08 | Source: Stephen Gunnion | Author: Stephen Gunnion

Northam to report record operating profit

The platinum producer says its performance has been underpinned by its growth and diversification strategy.

Northam Platinum is preparing to report a record first-half operating profit helped by a big increase in sales volumes and better prices for the metals it produces.

In an operational update, the platinum group metals producer said operating profit was likely to top R1 billion for the six months to end-December, an increase of 204% from a year earlier. That's off the back of a 49% improvement in revenue to R5 billion. It attributed a 40.5% rise in 4E metal sales volumes to its growth and diversification strategy. These include platinum, palladium, rhodium and gold. It was also assisted by a 4.2% rise in the dollar basket price of metals and a weaker rand over the period.

Northam said its total refined metal production increased by 41% to 299,323 ounces over the period. The increase included a net restocking of 30,000 ounces of excess inventory that was accumulated prior to the commissioning of its second furnace. Its remaining excess inventory at the end of December amounted to 140,000 ounces, with a value of R1.9 billion at cost and estimated sales value of about R2.3 billion. It expects to continue restocking for the remainder of its financial year.

It expects to report a reduced loss per share of between 17.8c and 18.6c for the six months to end-December, down from an 81.1c loss a year earlier. Its headline loss per share will decline to between 18.6c and 19.4c, down from 80c.

The anticipated losses are due to Zambezi Platinum's non-cash preference share dividends, which Northam consolidates into its results as it's required to do under International Financial Accounting Standards. Normalised headline earnings, which have been adjusted to take the impact of its black economic empowerment transaction into account, are expected to rise more than 190% to over R550 million.

Northam said it had continued to invest in the development of its Booysendal South mine as part of its growth and diversification strategy. It said it continued to grow down the industry cost curve as Booysendal's low-cost production volume increases.

Its shares fell 4.5% to R49.41 yesterday.

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