An underlying operating profit of $7m (£5.6m) for the year to September 2016 would appear to vindicate those who bought into Lonmin 's (LMI) supposed recovery story this year. But dig below the headline figure, and the South African miner still faces enormous hurdles to make money, even after beating last year's ZAR1.3bn (£72m) cost reduction programme by 86 per cent.
That's because unit costs remain under pressure, and are expected to be in the range of ZAR10,800 -11,300 (£596-£623) an ounce this year, which remains worryingly close to the ZAR11,637 average selling price in 2016. Outgoings are set to increase on the back of two post-period events. First, Lonmin reached a wage agreement with its main union, promising a 7.6 per cent average annual salary increase; then last week the company increased its stake in the lossmaking Pandora mine after acquiring Amplats' remaining 42.5 per cent holding for ZAR400m. Despite the outlay, Lonmin is confident it can access "additional ounces without incurring further capital expenditure".
Peel Hunt expects an adjusted pre-tax loss of $2m and a loss per share of 3.5¢ for the year to September 2017, compared with losses of $12.6m and 3.1¢ in 2016.
LONMIN (LMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 209p | MARKET VALUE: | £590m | |
| TOUCH: | 209p-210.3p | 12-MONTH HIGH: | 253p | LOW: 36p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 532¢ | NET CASH: | $173m | |
| Year to 30 Sep | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share ($)* | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 1.60 | -0.70 | -13.0 | nil |
| 2013 | 1.50 | 0.14 | 3.73 | nil |
| 2014 | 0.97 | -0.33 | -3.97 | nil |
| 2015 | 1.29 | -2.26 | -34.4 | nil |
| 2016 | 1.12 | -0.36 | -1.37 | nil |
| % change | -14 | - | - | - |
Ex-div: na Payment: na £1=$1.25 *Adjusted for 2015's 46-for-one rights issue and share consolidation. | ||||
