Platinum miner Lonmin's half-year profits were hit hard by a combination of rising costs, falling metals prices and work stoppages. And while management anticipates a better second half, there's few obvious near-term catalysts ahead to drive a re-rating
In the circumstances, performance at Lonmin's deep, dangerous and costly South African mines was actually fairly stable - platinum sales remained at 318,000 ounces. But platinum prices slipped 10 per cent year on year to an average of $1,566 an ounce, while disruption from government safety crackdowns meant the group lost 170,000 tones of production in the period, which boosted unit costs by 11 per cent. A strong rand and weak global car markets - catalytic converters account for 40 per cent of global platinum demand - also hurt. Moreover, there's growing concerns over Lonmin's ambitious capital spending programme - it will invest $450m this year as part of a $2bn five-year growth plan. Management has decided not to defer any spending for now, but will monitor its finances closely and could postpone outlays should markets fail to improve.
Credit Suisse expects adjusted full-year pre-tax profit of $214.8m, giving EPS of 64¢ (£293m and 135¢ for 2011).
LONMIN (LMI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 839p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 838-840p | 12-MONTH HIGH: | 1,622p | LOW: 836p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 1,426¢* | NET DEBT: | 11% | |
| Half-year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 938 | 159 | 44.5 | nil |
| 2012 | 751 | 18.0 | -11.8 | nil |
| % change | -20 | -89 | - | - |
*Includes intangible assets of $1.1bn, or 544¢ a share £1= $1.61 | ||||
