By Nelson Banya
(Reuters) -Shares in Anglo American Platinum (Amplats) fell to their lowest level in more than two years on Monday after the platinum group metals (PGM) miner reported a 38% fall in annual profit and said power cuts could dent output this year.
Amplats’ shares were down 3.1% by 1130 GMT, having hit their lowest since early October 2020 earlier in the session.
The company said it expected costs to rise by between 10% and 16% in 2023, after more expensive labour, energy and consumables drove a 20% increase in 2022.
“The higher cost guidance for FY23 and higher capex guidance continue to erode the advantage that Amplats commanded over peers on a cash unit cost plus stay-in-business capex basis,” Investec Securities analysts said in a note.
Amplats Chief Executive Officer Natascha Viljoen on Monday said South Africa’s electricity crisis and the impact of Russia’s invasion of Ukraine would lead to a decline in global PGM supply.
The company said prices will reflect shifts in the supply and demand balance, but U.S interest rates and dollar strength were also factors.
Rising interest rates and a strong dollar typically result in lower prices for PGM, especially platinum, Amplats said.
South Africa, the world’s top PGM producer, is experiencing extended electricity cuts as coal-fired generating plants suffer frequent breakdowns, meaning Amplats’s refined PGM output could fall by 5% in 2023, Viljoen said.
She said Russia, the world’s number two PGM producer, is also struggling to maintain output because of problems accessing spare parts, even though it has avoided sanctions on its metal sales.
“If you consider that the bulk of PGMs come from South Africa and the other share coming from Russia, which has geopolitical challenges, there is pressure on supply going into 2023,” Viljoen told Reuters in an interview.
Viljoen, who is set to leave Amplats at the end of this year, said she was focused on “ensuring the stability and continuity of the business”.
Its headline earnings per share (HEPS) – the main profit measure in South Africa – fell to 185.42 rand ($10.28), down from 300.42 rand in 2021, after a two-month delay in its smelter rebuild hit PGM sales.
The Johannesburg-listed company’s PGM sales volumes declined by 25% to 3.8 million ounces last year, from a record 5.1 million ounces in 2021. In 2021, production was driven by an increase in refined output after the rebuild and recommissioning of the Anglo Converter Plant Phase A unit.
The Polokwane smelter rebuild, which was scheduled to be completed in October, was delayed until December after the delivery of sub-standard materials, the company said.
Amplats declared a total dividend of 115 rand per share, down from 300 rand per share last year, returning $1.66 billion to shareholders.
($1 = 18.0504 rand)
(Reporting by Nelson Banya; Editing by Tom Hogue, Uttaresh.V, Helen Reid and Barbara Lewis)
