Patrice Motsepe’s African Rainbow Minerals earnings plummet, slashes dividend

African Rainbow Minerals’ (ARM) headline earnings decreased significantly in the first half of its 2024 financial year, mainly due to lower commodity prices and impairments.

ARM – founded by billionaire Patrice Motsepe – released its results for the six months ended 31 December today, which revealed poor results.

Headline earnings decreased by 43% to R2.96 billion or R15.07 per share. ARM’s earnings were mainly dragged down by its platinum business.

ARM Platinum headline earnings were 121% lower at a loss of R282 million, compared to earnings of R1.33 billion in H1 2023. 

This is due to depressed commodity prices and above-inflation unit cost increases which also affected many of ARM’s competitors, like Implats, Amplats and Sibanye.

However, ARM’s Ferrous headline earnings were 12% higher at R2.82 billion, as a 67% increase in headline earnings for the iron ore division was partially offset by a 95% decline in headline earnings for the manganese division.

Key factors contributing to the higher headline earnings of the iron ore division included:

• Higher average realised US dollar prices for iron ore, in line with the increase in iron ore index prices
• A 6% increase in export iron ore sales volumes compared to the first half of 2023, coupled with a 23% increase in local iron ore sales volumes
• The weaker rand/US dollar exchange rate.

Lower headline earnings in the manganese division were driven primarily by lower average realised US dollar manganese ore and alloy prices, partially offset by the weaker ZAR/USD exchange rate and higher sales volumes.

ARM’s Coal headline earnings were 85% lower at R204 million, mainly due to lower export thermal coal prices.

Basic earnings decreased by 72% to R1.22 billion and included attributable impairments as follows:

• An impairment of property, plant and equipment at Two Rivers Mine of R1.07 billion after tax and non-controlling interests
• An impairment of property, plant and equipment at Modikwa Mine of R376 million after tax and non-controlling interests
• An impairment of property, plant and equipment at Beeshoek Mine of R288 million after tax
• An impairment of property, plant and equipment at Cato Ridge Works of R5 million after tax.

ARM said the impairments at its Platinum operations were mainly attributable to a significant decrease in profitability resulting from lower PGM commodity prices. 

The impairments at its Ferrous operations were mainly due to lower projected sales volumes and lower projected pricing.

As of 31 December 2023, ARM had net cash of R7.94 billion, a decrease of R1.84 billion compared to the end of the 2023 financial year. 

This amount excludes attributable cash and cash equivalents held at ARM Ferrous. 

ARM declared an interim dividend of 600 cents per share, a significant decrease from the 1,400 cents it declared last year.