Release Date: February 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Implats delivered strong production and commendable cost control despite several serious operational challenges.
- The group achieved an 8.5% improvement in lost-time injury frequency rates, with zero lost-time injuries reported at Mimosa.
- Group 6E ounce production increased by 18% to 1.9 million ounces, with refined 6E ounce production up by 19% to 1.75 million ounces.
- Implats met its environmental targets for water recycling and improved carbon emission and energy use intensities through increased use of renewable energy.
- The group closed the period with net cash of ZAR 5.2 billion, maintaining a strong and flexible balance sheet.
Negative Points
- The group reported 16 fatalities during the period, significantly impacting safety metrics.
- Revenue declined by 25% due to a 32% decrease in the rand revenue basket, despite a 12% increase in 6E ounces sales volume.
- Implats reported a ZAR 4.8 billion free cash outflow, skewed by negative working capital movements and once-off costs associated with the RBPlat acquisition.
- No dividend was declared for the period, reflecting the group's constrained profitability.
- The group faced inflationary pressures related to rand depreciation, with unit costs increasing by 5% at managed operations.
Q & A Highlights
Q: Can you elaborate on the operational challenges faced during the period and how they were managed?
A: (Patrick Morutlwa, COO) Production metrics benefited from the maiden interim consolidation of Impala Bafokeng, but notable gains were achieved on a like-for-like basis despite several serious operational challenges. A step change in operating momentum at Impala Rustenburg together with strong production at Zimplats helped counter lower throughput at Marula and Impala Bafokeng.
Q: What were the key factors impacting the financial performance of the group?
A: (Meroonisha Kerber, CFO) Weaker PGM pricing was the defining feature of the group's financial performance. Performance was negatively impacted by the retracement in U.S. dollar PGM pricing, which more than offset the positive impact of a notable gain in sales volumes and a weaker rand, resulting in materially lower reported revenue. Additionally, the maiden interim consolidation of the cost base of Impala Bafokeng and several once-off costs incurred on the conclusion of the RBPlat acquisition also impacted performance.
Q: How did the group perform in terms of safety and environmental targets?
A: (Nicolaas Muller, CEO) The group achieved an 8.5% improvement in the lost-time injury frequency rates during the period, discounting the impact of the 11 Shaft event. Zero lost-time injuries were reported at Mimosa, and notable safety improvements were achieved at Zimplats, Two Rivers, and Marula. We also met our targets for water recycling and improved our carbon emission and energy use intensities through using more renewable energy, specifically at Zimplats.
Q: What is the outlook for PGM markets in 2024?
A: (Sifiso Sibiya, Group Executive of Refining and Marketing) In 2024, all three major PGM markets are likely to remain in deficit, but our forecast market shortfalls are expected to moderate from those we witnessed in 2023. This is on the back of automotive production growth, which is expected to moderate, and industrial demand, which is expected to ease marginally as capacity expansions slow.
Q: What strategic actions are being taken to ensure the long-term sustainability of the group?
A: (Nicolaas Muller, CEO) We have interrogated our planned capital profile with several projects earmarked for deferral. Impala Canada initiated a restructuring and repositioned the operation during the period. There is significant focus on the strategic options available to protect value at Impala Bafokeng. Operating strategies are being evaluated at all operations to ensure business sustainability in the medium term.
Q: How did the group manage its capital expenditure during the period?
A: (Meroonisha Kerber, CFO) Capital expenditure increased by 38% as spend on our replacement and expansion projects accelerated and CapEx at our Canadian and Zimbabwean operations were impacted by rand depreciation. The group is focused on ensuring residual capital is spent on addressing safety and regulatory requirements, ensuring asset integrity, and advancing our strategic objectives.
Q: Can you provide more details on the financial position and liquidity of the group?
A: (Meroonisha Kerber, CFO) Implats closed the period with net cash of ZAR 5.2 billion. Our committed RCF facility of ZAR 6.5 billion and $94 million remain undrawn at year-end, resulting in closing liquidity headroom of ZAR 16.7 billion. Cash generation was constrained by weak pricing, significant transaction-related costs on the RBPlat acquisition, elevated capital expenditure, and several working capital adjustments.
Q: What are the key focus areas for Implats' social performance framework?
A: (Nicolaas Muller, CEO) Implats' social performance framework is directed at four key focus areas: community well-being, education and skills development, enterprise and supply development, as well as inclusive procurement and infrastructure development. These initiatives benefited more than 75,000 people and supported more than 4,000 employment opportunities during the period.
Q: How did the group perform in terms of production and cost containment?
A: (Patrick Morutlwa, COO) Group 6E ounce production increased by 18% to 1.9 million ounces and was 3% higher, excluding the maiden interim contribution from Impala Bafokeng. Refined 6E ounce production increased by 19% to 1.75 million ounces and was 4% higher on a like-for-like basis. The benefit of volume gains and cost containment was offset by inflationary pressure related to rand depreciation.
Q: What is the group's approach to managing the current pricing profile and ensuring sustainability?
A: (Nicolaas Muller, CEO) The current pricing profile requires a robust strategic response to ensure the long-term sustainability of the group. We have initiated a comprehensive review of medium-term capital expenditure and planned production profiles, with steps taken to preserve cash balances and secure positive free cash flow. Individual operational responses continue to evolve to adapt to the downturn in PGM pricing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
