OREANDA-NEWS. Anglo American Platinum Limited (Anglo American Platinum) reported headline earnings per share of R5.14 in the first half of 2013, an 88% increase primarily due to a weaker Rand and an increase in platinum sales volumes, partially offset by the impact of higher costs and lower realised dollar metal prices. Headline earnings for the first half of 2012 excluded an after-tax loss of R1.2 billion (R4.55 per share) resulting from the revaluation of Wesizwe Platinum Limited investments and the write-down of assets, which were considered uneconomical in the current environment, compared to an after-tax loss of R142 million(54 cents per share) in the first half of 2013.

Net sales revenue increased by 24% or R4.7 billion to R24.1 billion. R1.8 billion of the increase in net sales revenue was due to higher sales volumes and R2.9 billion was due to higher average realised Rand prices. Refined platinum sales for the period ended 30 June 2013 increased by 11%, to 1,074,155 ounces. The realised average dollar basket price declined by 5% from USD 2,532 per ounce in the first half of 2012 to USD 2,416 per ounce. However, the average exchange rate achieved on sales during the first half of 2013 was R9.31, 17% weaker compared to R7.94 in the first half of 2012. As a result, the average realised Rand basket price in the first half of 2013 was R22,473 per platinum ounce, 12% higher than the basket price of R20,086 achieved in the first half of 2012.

The first half of 2013 was characterised by intermittent illegal industrial actions which impacted production, unit costs and labour productivity. Notwithstanding these challenges, Anglo American Platinum delivered solid operational performance during the period. Equivalent refined platinum production was 1.2 million ounces, in line with the first half of 2012. Labour productivity declined marginally by 1% to 6.5 m2 in the first half of 2013.

Chief Executive Officer (CEO) Chris Griffith said: “We are pleased to report a significant improvement in safety and production performance in spite of the challenging industrial relations environment. We are also encouraged by the operational performance of our underground mines, particularly against the backdrop of illegal industrial actions, a national bus driver strike which impacted employees’ ability to commute to work and labour shortages as a result of lack of flexibility in deploying staff to areas where they are needed.

I am deeply saddened that one of our employees lost his life during the first half of 2013. We extend our sincere condolences to his family, friends and colleagues. We wish to assure everyone that we will learn from these incidents to prevent the same type of incident in future. We are continuing to work with Government and our workforce to implement more effective means of addressing major risks and non-compliance to standards. The journey to zero harm remains our key strategic objective.”

The global platinum market continues to suffer supply disruptions, production curtailment and capital rationing in the current economic environment, while net platinum demand is expected to remain relatively flat in 2013. This is despite higher than expected demand in the first half of 2013. Vehicles sales in Europe remain depressed with price sensitive jewellery and investment demand vulnerable to any platinum price improvement from the current depressed levels.

Primary supply challenges are expected to continue during 2013 with higher mining inflation putting pressure on margins and increased risk of supply disruptions from industrial action in South Africa. The current depressed price has reduced operating margins and consequently capital investment in sustaining current and increasing future production has reduced significantly.

CEO Chris Griffith said: “Although we believe that the longer term supply / demand outlook for the platinum business remains attractive, the operating environment remains difficult. The dollar basket price is under pressure due to the weaker global economic environment, mining inflation has remained well above the South African consumer price index and labour unrest linked to union rivalry continues to present challenges.

While Anglo American Platinum delivered a strong growth in earnings, the need to restructure the company – to restore profitability and align production with market demand – has not diminished and it is required for the long term sustainability of Anglo American Platinum through the cycles.

We have continued with the process of reducing overhead costs and improving efficiencies so as to align our cost base with the proposed footprint. We will right-size and simplify the overhead structure to support the revised portfolio review proposals.”

The company is revising its refined platinum production target for 2013 to 2.3 million ounces, up from the previously announced target of between 2.2 and 2.3 million ounces of platinum as a result of the delay in the implementation of the restructuring proposals.