Northam earnings hit hard by failed RBPlats foray

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Northam Platinum will report a decrease in annual basic earnings per share of between 70% and 80%, primarily as a result of a R4.1 billion non-cash impairment cost relating to its investment in Royal Bafokeng Platinum (RBPlat).

Northam last month announced it would sell to Impala Platinum its almost 35% stake in RBPlat, which it had acquired as part of a failed plan to eventually gain control of the company.

Northam had paid a premium for the shares but took the R4.1 billion hit in selling into Impala's lower offer price, which it extended to all RBPlat shareholders.

"The Implats mandatory offer, with a substantial cash underpin, presented a well-timed opportunity in the prevailing platinum group metals (PGM) market for Northam to secure a very significant cash injection that materially strengthens Northam's balance sheet and liquidity position," the company said in a trading statement published on Monday.

The Implats mandatory offer amounted to R90.00 in cash and 0.3 new ordinary shares in Implats. Northam therefore received, in aggregate, R9 billion in cash and 30 065 866 Implats shares.

Beyond the RBPlats impact, Northam's earnings were also impacted by a R2.7 billion non-cash impairment relating to the Eland operation as a result of a substantial deterioration in the pricing of PGMs, which will be reversed should market conditions improve in the future. 

In its trading statement, Northam reported strong operational performance for the year ended in June 2023, and a 16% growth in sales revenue to R39.5 billion, notwithstanding a 6.9% decrease in the metals basket price.

The group said it expects to report a 3.8% increase in gross profit to R15.4 billion and between 2.5% and 12.5% decrease in headline earnings per share.