Sibanye-Stillwater Faces Sharp Decline in Interim Earnings Amid Lower PGM Prices and U.S. Asset Impairment
Sibanye-Stillwater is set to report a significant drop in its interim earnings for the first half of 2024, with profits expected to plummet by nearly 100%. The company's gold production decreased by 21%, while prices for platinum group metals (PGMs), particularly palladium, remained under pressure. Additionally, the company has recorded a R7.4 billion (USD 420 million) write-down on its U.S. platinum operations, primarily due to lower palladium price forecasts.
Sibanye-Stillwater's South African PGM operations saw a slight 4% increase in output, producing 878,606 ounces of 4E metal in the first half of 2024. However, its managed gold operations in South Africa, excluding DRDGold, experienced a 21% decline, producing 265,179 ounces. The reduced gold output was largely attributed to the closure of the Kloof 4 shaft and increased seismic activity, which restricted access to high-grade areas at the Kloof and Driefontein mines.
Headline earnings per share (HEPS) for the interim period, excluding impairment impacts, are expected to decrease by 97% to 98%, falling to between 4.6 cents and 5 cents. This is a stark contrast to the 262 cents per share reported in the same period last year.
The $420 million impairment related to the U.S. PGM operations reflects the decreased expected future cash flows due to lower palladium prices. This impairment is anticipated to result in a significant interim loss of between 250.8 cents and 277.2 cents per share, compared to earnings per share of 262 cents in the same period last year.
The decline in earnings has been driven by significantly lower PGM prices, which led to a 28% drop in the average rand PGM basket price, severely impacting revenues. However, this was partially offset by an 18% increase in the average rand gold price.
Sibanye-Stillwater's profitability was further affected by lower production and higher unit costs at its South African gold operations, following the cessation of production at the Kloof 4 shaft and seismicity issues at Kloof and Driefontein. Despite these challenges, the company reported a 22% increase in nickel production, totaling 4,270 tons for the period, although profitability in this segment remains challenged by low nickel prices.
The acquisition of Anglo American Platinum’s 50% stake in the Kroondal Pool and Share Agreement in November last year contributed an additional 67,834 ounces of 4E PGM in the first half, helping to mitigate some of the impacts of restructuring and shaft closures.
