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Tharisa held back by upgrade spending

Tharisa's pit work and fleet spending combined with poorer chrome prices cut its profit by almost three-quarters
May 17, 2019

The palladium price has risen 34 per cent in the past 12 months, and its key producers have seen strong gains despite major operational weaknesses. However, Tharisa (THS), which released its results for the six months to 31 March this week, did not. 

IC TIP: Buy at 108p

During the first half, Tharisa sold its platinum group metals (PGM) basket for $1,017 (£797) an ounce (oz), and produced 67,600 oz, a 12.2 per cent fall on the same period in 2017-18. Chrome production also fell, and the price was down 15.5 per cent year on year. As a result, adjusted cash profits fell 44.4 per cent year on year to $30.1m.

There is more light for Tharisa investors looking ahead, however, with full-year PGM guidance maintained at 150,000 oz and the company sticking to its ‘Vision 2020’ plan in which PGM production jumps to 200,000 oz and chrome climbs from 1.4m tonnes (Mt) this financial year to 2Mt in the next.

Additionally, a Bank of Montreal report this month on chrome outlined why the price will eventually recover: conservative forecasts for stainless steel see annual growth of 3 per cent, and even that needs an extra million tonnes of ore per year, which the bank says is a challenge for the sector. Stockpiles in China are already dwindling, its analysts said.  

Analysts at house broker Peel Huntforecast adjusted earnings of 13.1¢ a share for the year to September 2019, down from 18.1¢ in FY2018.  

THARISA (THS)   
ORD PRICE:108pMARKET VALUE:£285m
TOUCH:105-110p12-MONTH HIGH:121pLOW: 86p
DIVIDEND YIELD:1.8%PE RATIO:11
NET ASSET VALUE:113pNET DEBT:2.6%
Half-year to 31 MarTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201819937.2102
201916710.240.5
% change-16-72-60-75
Ex-div:6 Jun   
Payment:19 Jun   
£1=$1.28