IMPALA Platinum (Implats) today announced a R4/share final dividend for its 2020 financial year, taking the full-year payout – including a R1.25/share interim payment – to R4.2bn after receiving 56% more for its basket of metals in rands during the period. Free cash flow doubled year-on-year to R14.4bn.
This represents a stellar performance for CEO, Nico Muller, who less than three years ago was under the cosh, preparing to retrench 12,500 people at the firm’s older shafts whilst the company’s share price sank to its lowest ever level of under R20/share.
Implats is now capitalised at R124bn, just below the market value attributed to Sibanye-Stillwater which was rumoured to have had a takeover interest in Implats whist it was suffering its 2018 nadir. The turnaround in Implats’ fortunes has been remarkable so far.
The year-on-year improvement is largely price-driven, but it could nonetheless usher in a period of heightened returns for shareholders. “I have got no doubt the markets will remain robust,” said Muller in a media conference call. “Our dividend policy is a minimum of 30% of free cash flow pre-growth, and in the absence of growth opportunities I am doubtful the distribution policy will remain at 30%. It is highly likely it will be increased.”
The rand fell out of bed in the second half of the year burnishing already strong dollar numbers for platinum group metals (PGMs), especially rhodium – the average price of which ended 167% higher. Overall, Implats’ average dollar-denominated basket of 6E metal prices were 46% higher, but in rands it was 57% higher, averaging R24,863/oz.
The impact was to obliterate the overall negative financial impact of the Covid-19 pandemic, although the company booked a 290,000 ounce ‘opportunity cost’ – revenue lost from unsold refined metal. But the line shareholders will notice second is record share earnings of R16.1bn, equal to R20.75/share.
Meroonisha Kerber, Implats CFO, said first stop for the company’s finance team in the current year was to secure balance sheet targets. She acknowledged, however, that at the current clip of cash generation “… we will achieve our ambitions quickly”. The company ended the period with net cash of R5.7bn after financing its R9.4bn acquisition of North American Palladium. Net cash as of June 30, 2019 was R1.1bn.
Muller said Implats would allocate more funds to capex in the next two years of between R6bn to R6.75bn from R4.5bn in the year under review. Thereafter, capex would moderate to between R5.2bn to R5bn. But there was no immediate risk of embarking on significant growth capital, however.
“I don’t want to create that impression; we don’t have any major capital plans in the short-term,” said Muller, adding there was a dearth of growth opportunities in South Africa whilst the significant opportunity that did exist in Zimbabwe was heavily influenced by its political crisis. “I would be cautious to invest growth capital at the moment,” he said.
Implats has guided to production in the current year of between 2.8 million to 3.4 million oz 6E which compares to refined output of 2.8 million oz in the 2020 financial year (2019: 3.13 million oz). Owing to maintenance activities, the company had 100,000 oz of concentrate stock on hand.
The outlook for metal prices was ‘bullish’, especially for rhodium where an extended supply deficit was likely. The Covid-19 pandemic would have a cyclical rather than a fundamental impact on the markets, said Implats.