We use cookies to provide you with a better experience. If you continue to use this site, we'll assume you're happy with this. Alternatively, click here to find out how to manage these cookies

hide cookie message
RSS FeedFinancial Planning

Lonmin posts pre-tax profit fall


The platinum producer blamed production interruptions, price falls and rising costs for the fall in profits

Article comments

Lonmin blamed production interruptions, price falls and rising costs for a pre-tax profit fall in the first six months of its financial year, the platinum producer said on Monday.

Weak European demand weighed on prices and a record level of safety stoppages imposed by South African authorities hit output and operating costs, the world's third-largest platinum producer said.

Lonmin said a 10 percent drop in average prices and costs up almost 11 percent in the six months reduced pre-tax profit to just $18 million (£11 million). That compares to $159 million a year earlier.

But the miner stuck to its closely watched spending plans, as it ramps up growth shafts to bring down the overall cost of producing an ounce of platinum. Chief executive Ian Farmer said Lonmin would be prudent, however, with what analysts say is one of the weaker balance sheets in the industry.

"Lonmin is in a tough position. It has to walk a tightrope between creating a strong and robust company... and navigating the short term," Farmer said. "Mining is a long-term game. I can't flip-flop every time there is a Greek headline."

Miners across the board have been feeling pressure from investors to take a more disciplined approach to spending. Lonmin, which faces debt covenants of 3.75 times net debt to core profit, plans to spend $450 million this year ramping up growth shafts to cut unit costs.

Farmer said Lonmin consistently reviewed its position.

"In our view the medium- to long-term PGM (platinum group metals) market fundamentals, however, remain sound and this strategy will benefit our shareholders as the market improves," Farmer said.

Net debt stands at $356 million, up from $234 million at September 2011.

Lonmin's drop in profit and rising costs hit the miner's shares, down 3.6 percent at 869 pence at 0940 GMT, but not far below a 2.7 percent drop in the broader sector.

Lonmin reported as the industry met in London for its annual Platinum Week gathering, reviewing a South Africa-focused sector battered by stoppages, strikes, soaring costs and lacklustre appetite in its key European auto market.

Read also:

Mining: Balancing risk and reward

Share:

Recommended Articles

Comments

Lonmin posts pre-tax profit fall
Financial Planning

Can finance rise to the challenge of major transformation?

Can finance rise to the challenge of major transformation?

Outdated finance processes, systems and competencies leave too many questions unansweredmore ..


Apple posts 5% rise in revenues to $37.4bn

CFO Luca Maestri said Apple had beaten the PC industry average in 32 of the last 33 quartersmore ..

Microsoft posts 18% revenue rise thanks to cloud

Profits for the quarter were down, howevermore ..

Public sector borrowing higher than expected in June at £11.4bn

public sector net debt equalled 77.3 percent of GDP, the ONS said.more ..

Budget: What business wants

CFOs are keen for the chancellor to avoid any uncertaintymore ..

Stay ahead of the curve

CFOs used to low interest rates ignore working capital optimisation at their perilmore ..

Send to a friend

Email this article to a friend or colleague:


PLEASE NOTE: Your name is used only to let the recipient know who sent the story, and in case of transmission error. Both your name and the recipient's name and address will not be used for any other purpose.



In Depth
Can finance rise to the challenge of major transformation?

Can finance rise to the challenge of major transformation?

Outdated finance processes, systems and competencies leave too many questions unanswered more ..

In Depth
Interim CFO or consultant? The pros and cons

Interim CFO or consultant? The pros and cons

Ed Harding offers an insight into the life of an interim CFO and the advantages in driving transformation more ..

Advertisement

* *