Northam H1 results underpinned by strong market fundamentals
Northam Platinum today released its results for the half year ended 31 December 2006.
- Anticipated decline in PGM production in concentrate contained to 3.3%
- Robust PGM market conditions
- Sales revenue reaches R1.8 billion level
- Profit attributable to shareholders 118% higher at R661 million
- 115% increase in HEPS to 279.6 cents
- Dividend of 245 cps declared
Results for the first half of the 2007 financial year were particularly characterized by sustained robust metal prices, contributing to the record sales revenues of R1.8 billion for the half year. This compares with R1.1 billion in the comparable reporting period of F2006, a spectacular 66.7% higher. This represents 75% of the R2.4 billion total sales revenues achieved in the entire 2006 financial year.
As a consequence, net profit attributable to shareholders increased by 118% to R661 million, with headline earnings per share at 279.6 cents, 115% higher year on year. The interim dividend of 245 cps reflects the company's policy to return excess cash to shareholders.
Fueled by the strong metal price environment and the weaker rand against the US dollar, Northam has continued to accumulate cash, with healthy cash levels at R1.1 billion - R479 million (or 78%) higher than cash levels at the end of the December 2005.
On the operational side the anticipated decline in production of PGMs in concentrate was creditably contained to 3.3%, at 5 618 kg (180 623 oz) while metal sales declined by 7.0% year on year, owing mainly to a build-up in inventories.
Milled tonnages were higher by 4.9% at 1 251 612 tonnes, with UG2 tonnes representing 40% of the total tonnages milled, a year on year increase of 15.2%, and reflecting the continued challenging geological conditions on the Merensky reef horizon. The higher tonnages milled were, however partly offset by lower head grades from both reef horizons, (in combination at an average head grade of 5.1g/t) which contributed to the decline in production of precious metals in concentrate.
As anticipated at the end of the 2006 financial year, costs came under pressure. With the higher tonnages milled and increased development, total operating costs increased by 14%, to R697 million.
"On the positive side though, unit costs, in terms of rands per tonne milled were limited to a rise of 8.4%,” explained Northam chief executive Glyn Lewis.
Looking ahead, Lewis anticipates that production and sales of PGMs in the second half of the year are likely to be some 15% below the H1 numbers. At prevailing rand metal prices, this could result in a slight decline in earnings in the next reporting period.
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