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Commodity boom sees Royal Bafokeng Platinum deliver stellar 2020 results

Group weathers Covid-19 and declares a maiden divided.
Something to trumpet about... Steve Phiri, CEO of Royal Bafokeng Platinum, seen here celebrating the listing of the group on the JSE back in 2010. The group declared it maiden dividend on Tuesday. Image: Company Website

Royal Bafokeng Platinum delivered a record financial performance for 2020 on Tuesday, reporting a more than 2 500% increase in headline earnings per share to 1 354.4 cents compared with 50.4 cents in 2019.

The stellar results, which came largely off the back of a boom in platinum group metals (PGMs) and the weaker rand last year, saw the mid-tier miner declaring its maiden cash dividend of 575 cents per share for the year ended December 31, 2020.

It was a milestone year for Royal Bafokeng Platinum, despite the impact of Covid-19, which saw South African mining activities being halted for several weeks during the initial hard lockdown in late March and April.

The group, which has the Royal Bafokeng nation as its biggest shareholder, marked its tenth year of being listed on the JSE in 2020.

Royal Bafokeng Platinum Limited listed on the bourse in November 2010 at a stock price of around R64 a share. Today it has a market capitalisation of more than R26.3 billion.

Following its latest results, the company’s stock price traded just over 3.7% firmer (R105.50 at 2:50pm) on Tuesday. However, it has gained some 15% in the wake of the group’s trading statement on February 25, 2020, which highlighted the expected spike in revenue.

Read: Platinum stocks soar on kick from recovery in auto sales

On the back of surging commodity prices, the stock is more than 40% up year-to-date and 155% up over the last year. This comes after it hit a low of around R15.65 a share ahead of the lockdown in March last year.

Royal Bafokeng Platinum reported revenue of R13.4 billion in 2020, a surge of 78.6% compared with the prior year (R7.5 billion).

It said that the strong PGM basket price helped boost revenues.

“Earnings before interest, taxation, depreciation and amortisation [Ebitda] increased by 278.4% from R1 756.4 million to R6 646.5 million, with our Ebitda margin increasing to 49.7% from 23.4% in the previous comparative period,” the group noted in its results statement.

“Consolidated gross profit increased by 697.1% to R5 430.7 million from R681.3 million in the comparative period.

“Notwithstanding the pandemic’s impact, the year was characterised by a significant improvement in the PGM market, a weaker South African rand and strong operational performance, [which resulted] in record production with a year-on-year increase in tonnes hoisted of 9.2%,” the miner said.

Commenting on the results, Royal Bafokeng Platinum CEO Steve Phiri said despite the negative impact of Covid-19 on operations and the business as a whole, the group’s “more than mining” philosophy helped it deliver a record performance with enhanced shareholder returns.

“Our growth and optimisation of our operations, continued to deliver a more robust business, supported by a strengthened balance sheet,” he pointed out.

“In addition, guided by our dividend policy, and given the strong cash flow generation in 2020, with R3 billion of free cash flow before growth capex, the board declared a final gross cash dividend of 575 cents per share, equating to R1.5 billion,” said Phiri.

“In 2020 we commemorated our first ten years on the JSE, and also saw the global spread of the Covid-19 pandemic, which really tested our flexibility and our ability to protect the sustainability of our business” he noted.

“Despite the strong underlying [commodity] market outlook, the ultimate duration of the Covid-19 pandemic and its impact on the global economy remains unpredictable,” he warned.

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Well, it is this commodity boom that saved our (tax increase) bacon during the recent February Budget speech.

This company is delusional on the value that they add. The only value added is from the underlying investments eg First Rand, Platinum etc. Its a holding company ie a unit trust in substance.

I wonder if the sum of parts is more or less than the market capitalization ie does it trade at a premium or discount to the NAV.

End of comments.

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