Sibanye-Stillwater to reinstate dividend in second half of 2020 after closing book on deal blitz

Neal Froneman, CEO, Sibanye-Stillwater

SIBANYE-Stillwater would reinstate the dividend at the half-year point of the current financial year, said group CEO, Neal Froneman today.

“We are seriously committed to re-establishing the dividend and – I need to watch my words – it will probably be reinstated at the half year,” he said today at the firm’s year-end results presentation, before adding: “Probably is a light word. It will definitely happen.”

Sibanye-Stillwater’s debt as a proportion of earnings before interest, tax, depreciation and amortisation (EBITDA) would fall to about 0.4x by year-end, according to an estimate in the firm’s year-end presentation. This compares to a net debt to EBITDA ratio of 2.5x at the close of the 2018 financial year and 1.25x as of December 31 last year.

Froneman also said the company would consider extraordinary dividend payments, a prospect that had been discussed at board level. “No decision has been taken on this, but we would consider an extraordinary dividend from the gold division. If you want to be a leading dividend-payer you can’t just rely on ordinary dividends,” he said.

Charl Keyter, CFO for Sibanye-Stillwater, said another aim was to reduce the firm’s net debt from its current level of $1.8bn to about $1bn. This would create a margin of comfort into the business he said.

Restarting the dividend is a critical moment for Sibanye-Stillwater as the prevailing criticism was it had over-reached itself by announcing successive transactions, starting with the $2.2bn takeover of Stillwater Mining in 2017.

It was after this deal that Sibanye-Stillwater suspend the dividend, and drawing criticism that Froneman had reneged on his promise to make cash returns a defining feature of the firm’s investment appeal. The Stillwater deal was followed by the takeover of DRDGold and a merger with Lonmin, an all-share transaction.

These latter two transactions were completed in 2019 and coincided with the recovery of the firm’s gold division from a five-month strike orchestrated by the Association of Mineworkers & Construction Union, which had started in November 2018. Gold production totalled 932,659 oz for the year under review which compares to 2018 production of 1.18 million oz. Mining difficulties at Stillwater Mining were also overcome.

Assisted by extremely strong pricing for the rand basket of PGMs, and a strong gold price, Sibanye-Stillwater reported a full year increase in EBITDA of 79% year-on-year to R14,96bn. Group profit came in at R433m representing a R3bn turnaround on the R2,52bn loss recorded in 2018.

Sibanye-Stillwater reported a profit of R604m in the second half of the year which offset the R171m loss in the first half, and suggestive that momentum is now with the company. As a result, group leverage would “decline naturally,” it said.

On a normalised basis, earnings came in at R2.36bn for the 2019 financial year compared to a R1.45bn loss in the previous year.

Commenting on merger and acquisition activity, Froneman said he wasn’t a “deal junkie” and that future deals – if they occurred – could not result in the kind of balance sheet leverage required for Stillwater Mining. Shareholders had told Sibanye-Stillwater that it couldn’t “stop and start” on dividend payments, Froneman said.

“The board has a similar view,” said Froneman. “When we start, the dividend has to be sustainable … You can accept that with confidence; we have to cut our cloth to suit, especially on further M&A,” he said.

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