Amplats trading update pretty poor

This morning we had a very disappointing trading update from Anglo Platinum. This industry cannot catch a break with the biggest global producer announcing a more than 20% decrease in earnings compared to the 6 month period ending June 2011. The stock is down 2.7% while the whole index is down 1.7%.

"Anglo American Platinum's earnings for the period is expected to decrease by more than 20% from that reported in the six month period ended 30 June 2011. However, in view of volatility in exchange rates and metal prices, Anglo American Platinum cannot, with reasonable certainty, quantify the extent of the decrease in expected earnings other than that the decrease is expected to be more than 20%. The expected decrease in earnings is primarily as a result of lower sales volumes and lower metal prices achieved compared to the comparative period."

So not much info given but I can tell you now that reasons include lower production due to labour issues, increasing costs due to electricity tariff and wage increases. The Platinum price, as we spoke about a while ago is not actually that cheap when you compare it to oil. I wouldn't say that is an excuse for a 20% decrease in earnings. Last year the company made 1236c per share for the period. Assuming best case scenario, earnings are down only 20%, the company will make 988c. At R468 the company looks pricey for an industry that is struggling. I can't say in decline because I do feel the platinum price will pick up. We will await the full release on the 23 July for all the explanation.