Anglo American Platinum delivered another strong financial performance in H1 2019, with increased earnings, returns and operating cash flows, benefitting from strong market fundamentals which saw the US Dollar platinum basket price increase 16%, and coupled with a weakening rand, led to the ZAR platinum basket price increasing by 33% year-on-year.
Key Financials
| H1 2019
| H1 2018
| % change
|
Dollar basket price / platinum ounce sold |
2,685 |
2,318 |
16 |
Rand basket price / platinum ounce sold |
38,305 |
28,695 |
33 |
Revenue (R billion) |
42.9 |
33.5 |
28 |
EBITDA (R billion) |
12.4 |
6.8 |
82 |
EBITDA margin % |
32% |
21% |
11pp |
Headline earnings (R billion) |
7.4 |
3.4 |
120 |
Headline earnings per share (R/share) |
28.15 |
12.82 |
120 |
Basic earnings (R billion) |
7.3 |
2.2 |
236 |
Basic earnings per share (R/ share) |
27.88 |
8.31 |
235 |
Operating free cash flow (R billion) |
4.3 |
1.9 |
126 |
Net cash (R billion) |
6.0 |
0.5 |
1,100 |
Dividend per share (R/ share) |
11.00 |
3.74 |
194 |
ROCE % |
45 |
22 |
23pp |
Headline earnings increased by 120% to R7.4 billion primarily because of a higher rand basket price, and a stock count adjustment gain of R1.0 billion in the period compared to a stock count adjustment loss of R0.4 billion in the comparative period.
The Company strengthened its balance sheet to end the period with net cash of R6.0 billion from the R2.9 billion net cash position at 31 December 2018. This reflects a R3.1 billion improvement after paying a final dividend of R2.0 billion for 2018 in March 2019.
Return on capital employed doubled to 45% due to the strong earnings
Chris Griffith, CEO of Anglo American Platinum commented:
“Anglo American Platinum has delivered safe, responsible and profitable production in H1 2019. We are committed to the elimination of fatalities and ensuring safe operations. We have had no fatal incidents at our own managed operations in H1 2019 and we continue to improve the overall safety performance of the business with a further reduction in the total recordable case injury frequency rate to the lowest on record.
Anglo American Platinum continues to deliver PGM industry leading returns and has increased EBITDA by 82% to R12.4 billion, resulting in an increase in the EBITDA margin to 32%, an increase in Return on Capital Employed (ROCE) to 45%, and an increase in headline earnings per share, up 120% to R28.15. The Board has declared an interim dividend based on a pay-out ratio of 40% of headline earnings of R3.0 billion, or R11.00 per share. This is a very much stronger business today because of the actions we have taken in recent years and I’m pleased to say that there are further opportunities to unlock full potential from our operations.
We’ve seen steady production from our operations, though certain headwinds, including Eskom power shortages and strike action at Mototolo, have impacted our first half performance but we expect to see a stronger performance in H2 2019. Mogalakwena production was slightly lower as we mined through a new cut and focused on waste removal in H1, allowing us greater access to ore tonnes in H2 2019. The turnaround plan at Amandelbult is progressing with significant improvement on the development of Dishaba seen in Q2 and the subsequent increase in immediately available ore reserves, with an expected ramp-up now that the infrastructure upgrades have been completed. Unki continues to deliver, with another record performance. Mototolo had a tough start to the year, due to the unprotected strike and difficult ground containing geological faults but is expected to step up performance going into the second half.
We made progress on refining the work-in-progress (WIP) inventory. However, Eskom power outages, the Mortimer smelter furnace rebuild in Q1 and a stock count gain in the period has led to a temporary build-up in WIP inventory which should be largely refined in H2 2019.
The fundamentals of PGM demand remain robust, with the US Dollar platinum basket price increasing 16%, particularly for palladium and rhodium, and coupled with a weakening rand led to a ZAR platinum basket price increasing by 33%. Despite the temporary increase in WIP, we generated operating free cash flow of R4.3 billion, increasing net cash to R6.0 billion.
We are focused on the next phase of value delivery and work is under way to realise value at existing operations. Our aim is to achieve and beat world best operating practices and implementing FutureSmart™ technology and innovation to enable material efficiency improvements. Market development continues to progress, with a number of achievements made in H1 2019, including the announcement of the launch of Lion Battery Technologies Inc. partnership for the accelerated development of next-generation PGM-containing batteries, and the announcement of the Mirai Creation Fund II joining Anglo American Platinum, Mitsubishi Corporation & The Public Investment Corporation as an investor in AP Ventures. Finally, project studies continue to assess how to unlock optimal value from Mogalakwena and the Mototolo/Der Brochen ground.”
Short form announcement
This short-form announcement is the responsibility of the directors. It is only a summary of the information contained in the full announcement and does not contain full or complete details. Any investment decision should be based on the full announcement accessible from Monday, 22 July 2019, via the JSE link and also available on the Company’s website at www.angloamericanplatinum.com.
These interim results have been reviewed by the Group’s auditors, Deloitte & Touche who expressed an unmodified conclusion thereon.
Copies of the full announcement may also be requested by contacting Anglo American Platinum Investor Relations by email at [email protected] and are available for inspection at Company’s registered office at no charge, weekdays during office hours.
The JSE link is as follows: https://senspdf.jse.co.za/documents/2019/jse/isse/ANANP/HY19result.pdf
Johannesburg, South Africa
22 July 2019
Sponsor: Merrill Lynch South Africa Proprietary Limited