Anglo American Platinum Limited today reported a return to profitability with an operating profit of R2.0 billion for the 12 months to December 2013, up from last year’s loss of R6.33 billion. Revenue increased by 22% to R52.4billion, driven by higher sales volumes and the impact of the weakening Rand/USD exchange rate. Headline earnings increased to R1.5 billion from the loss of R1.5 billion incurred in 2012. The Company recorded headline earnings attributable to ordinary shareholders of R5.56 per share, compared to the loss of R5.62 per share in 2012.

The main focus of the year under review was the completion of the portfolio review and then beginning to execute its outcomes. The resultant once-off restructuring costs of R1.5 billion and asset write-downs of R 2.8 billion, combined with a higher effective tax rate, gave rise to an attributable loss for the year of R1.4 billion or R5.25 per share.

Taking into account the net debt position of the group and considering future funding requirements, the Board has decided not to declare a dividend for the 2013 financial year.

Chris Griffiths, Chief Executive Officer said, “We are pleased with the resilience that the business has shown in a difficult industry and pricing environment. While Anglo American Platinum will continue to face headwinds in 2014, we remain fully committed to returning the company to a state of sustained profitability that will benefit all of our stakeholders. Our efforts to optimise efficiencies and the implementation of on-going savings will remain a key priority. In 2014 we will continue to invest in the business in line with our strategy and to reap the benefits of the structural changes that we worked so hard to implement in 2013.”

Operational Review

Safety performance continued to improve in 2013. The year under review was the company’s best ever in terms of safety performance, with the lowest injury frequency rates ever recorded. The Group halved the number of fatalities from 25 in 2007, to 12 in 2011 and then halved this again in 2013 as the Company strives for zero harm. 

The completion of the portfolio review and execution of its outcomes saw the consolidation of Rustenburg and Union’s mines, as well as the establishment of a new operating model and associated organisational design for the Company. After finalisation of the consultation with organised labour, these organisational changes resulted in a reduction in operational employees by 7,500. By year-end, more than 5,000 people had left the organisation through voluntary separation measures and none through forced retrenchment. Furthermore, the Company delivered R1.9 billion in benefits from direct and indirect cost savings as it continues to focus on various value enhancement initiatives as part of the review.

In 2013, the Company produced and sold 2.3 million platinum ounces in line with its strategy, with both Mogalakwena and Unki reporting record production. Mogalakwena reserves increased materially (59%) by 52.5 million 4E ounces following increased drilling, enhanced structural interpretation and increase in the economic pit shell of the mine.

The Company’s JV operations produced 753,000 platinum ounces, which when excluded from the Marikana JV with Aquarius on a like-for-like basis, represents an increase of 11% year-on-year. This is due to higher production volumes at Bokoni (up 68%) and Kroondal (up 14%). The productivity improvement initiatives implemented at Kroondal and Bokoni, focusing on underground mining efficiencies, working place flexibility, changes to the support regimes, transition to owner mining contributed to delivering excellent results.

There have also been a number of other new initiatives to further embed change across the Company, including a much greater focus on the technical aspects of our business.  As part of this we have made appointments to two new executive positions – one overseeing technical and another safety, health and environment.

The 2013 financial year was a challenging year in respect of labour relations, due largely to the restructuring process. It also saw the National Union of Mineworkers (NUM) derecognised as the Company’s majority union and a new recognition agreement being signed with Association of Mining and Construction Union (AMCU) on 25 February 2013.

The Company and AMCU have been engaged in negotiations pertaining to wages and certain conditions of employment since the latter part of last year.  Despite attempts by the Company to reach an affordable and sustainable settlement, the parties have not yet been able to reach a solution acceptable to both parties. AMCU embarked on a protected strike on 23 January 2014.  The Company, along with Lonmin Platinum and Impala Platinum Holdings, is participating in a Council for Conciliation Mediation and Arbitration mediated wage negotiation process that is on-going.

Outlook

A significant number of cost savings initiatives were implemented last year which will result in the full annualised value being realised in 2014. In the year ahead, further cost and revenue benefits should be achieved through initiatives such as labour efficiency programs and supply chain initiatives.

Cost inflation will remain a challenge in 2014 as real inflationary pressures from wages and electricity persist. Cash unit costs are expected to increase to between R18 000 - R19 000 per equivalent refined platinum ounce for 2014.Whilst, the Company’s earnings remain highly geared to the Rand/US dollar exchange rate.

The Company’s project portfolio has been aligned with the proposals of the portfolio review. Capital expenditure is expected to be between R6.0 billion – R7.3 billion for 2014, excluding pre-production cost, capitalised waste stripping and interest. Capital allocation will continue to focus on the highest return and lowest risk opportunities in line with the Company’s value-enhancing strategy and capital austerity programme.

Anglo American Platinum believes that the long-term supply-demand fundamentals for platinum group metals remain attractive and expects that in the medium term, cumulative deficits will drive price recovery. An active marketing and commercial strategy will be crucial to maximising sustainable value and underpinning the portfolio restructuring that began in 2013.

The Company  remains of the view that there continues to be  a strong end-market for products containing PGMs or requiring PGMs for their manufacture, particularly motor vehicles, chemicals, glass and electrical products; and that this will continue at price levels above the current depressed levels and the incentive cost of South African mining supply. Sustainability of long term PGM demand is reliant on sustainability of supply, and our portfolio of mines is now well positioned in this regard.