Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 10.1% to almost $370 million, driven by strong chrome prices and increased production volumes.
- Net cash from operating activities was $86.2 million, demonstrating strong cash flow generation.
- The company announced a share repurchase program of $5 million and an interim dividend of $0.015 per share.
- Tharisa PLC has been listed on the JSE for 10 years, reflecting the maturity and sustainability of the business.
- The company has a strong balance sheet with cash and cash equivalents of $198.5 million and net cash of $86.3 million.
Negative Points
- Net profit after tax (NPAT) decreased by 29% to $38.8 million compared to the previous period.
- PGM production was down 7.7% due to the blend and type of ore processed, resulting in lower output.
- Operating in Southern Africa, particularly South Africa, presents daily challenges such as electricity and transport constraints, high crime, and corruption.
- The company faces fiscal and regulatory uncertainty, impacting trade flows and project development.
- Capital expenditure was high at $114.1 million, including significant investment in Karo Platinum, which has yet to yield returns.
Q & A Highlights
Q: Can you provide an outlook on commodity prices and demand trends for the second half of 2024, particularly for PGMs and Chrome?
A: (Phoevos Pouroulis, CEO) We've seen a 14% increase in platinum prices over the last four weeks, trading above $1,000. We expect stable PGM basket pricing with potential appreciation in the next six months. For Chrome, stainless steel production in China remains high, driven by sectors like domestic white goods and energy-efficient heat pumps. Current Chrome ore stocks in China are around 2.3-2.4 million tonnes, only a five-week supply, supporting prices above $300 per tonne.
Q: Given the weak PGM market, is there any appetite for discounted PGM acquisitions?
A: (Phoevos Pouroulis, CEO) Yes, we see opportunities for consolidation in the PGM industry, which could rationalize loss-making operations and support higher prices. The BHP Anglo deal is a significant topic, and we believe more consolidation will happen, benefiting the market.
Q: What is the status of raising external debt for Karo, and how confident are you in the investment given the macro risks?
A: (Michael Jones, CFO) We are progressing with a $160 million ECRC-backed funding package, albeit slower than expected. We are also exploring gold and base metal streams and have interest from African DFIs. (Phoevos Pouroulis, CEO) We have a long-term strategic view on PGMs, believing in their demand for decades. Despite current volatility, we see future supply constraints and are confident in our investment.
Q: Why is it appealing to buy back shares despite low liquidity, and will buybacks affect dividends?
A: (Michael Jones, CFO) We believe the share is significantly undervalued, making repurchases value-accretive. The share repurchase program and dividend policy are separate; buybacks will not offset dividends. We maintain a policy of distributing at least 15% of net profit after tax annually.
Q: Can you update on the export opportunities for Chrome via Mozambique and community relations amid upcoming elections?
A: (Phoevos Pouroulis, CEO) Our commodities flow consistently through Maputo, Richards Bay, and Durban, with 35% of exports via Maputo. Despite activism around elections, we have had no operational disruptions, thanks to strong community relations and ongoing engagement.
Q: What is the timeline for achieving 2 million tonnes of Chrome and 200,000 ounces of PGMs, and how are Vulcan recoveries progressing?
A: (Phoevos Pouroulis, CEO) We aim to achieve 2 million tonnes of Chrome by the end of next calendar year, with Vulcan recoveries improving towards 72% by the end of this financial year. PGM recoveries should follow six months after achieving Chrome targets, depending on ore mix.
Q: Can you comment on Chrome sales during H1 FY24, which were higher than production, and the outlook for sales going forward?
A: (Michael Jones, CFO) Chrome sales were higher due to timing issues of stock in transit. Going forward, we expect sales to align with increased production volumes.
Q: Why has capital expenditure more than doubled, and what is the plan for the second half of the year?
A: (Michael Jones, CFO) CapEx is higher due to timing mismatches and significant spending on Karo and deferred stripping. For the second half, we plan to spend $79.1 million, excluding Karo and deferred stripping, with an additional $38 million for Karo and similar deferred stripping costs as the first half.
Q: How are you managing community relations and potential risks around your mining complexes?
A: (Phoevos Pouroulis, CEO) We have strong community relations, with regular engagements and initiatives in education, health, and skills development. Our host community benefits from dividends and corporate social initiatives, ensuring stability and support.
Q: What is your strategy for achieving both Chrome and PGM recovery targets?
A: (Phoevos Pouroulis, CEO) We prioritize Chrome over PGMs due to current market conditions. Historically, we achieved 80% PGM recovery when processing 100% of our own mine material. We expect to stabilize blend ratios and achieve PGM recovery targets six months after Chrome targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
