Amplats trading update awful

Oh dear, not another trading update like the last one. I am referring to a late announcement from Amplats, after the market had closed yesterday. Here goes the ugly: "Headline earnings per share ("HEPS") for the period is expected to decrease to between 270 cents and 280 cents from 1,236 cents reported for the six months ended 30 June 2011." Is that it? Well, the stock got completely crushed this morning at the beginning of trade, down to as low as 407 Rand a share. It has settled to be down around two and a quarter percent on the day, on a day that the markets are doing pretty well.


OK, so why are "things" looking worse than the horrible environment that we already know about? Well, there are some things that you would have known about if you were paying attention a little closer: "The expected decrease in HEPS is primarily due to lower sales volumes and lower realised prices during the first half of 2012. Platinum sales volumes for the period were lower primarily due to the delayed restart of the converter plant post its annual maintenance." And then of course the more important factors, some would say that these are permanent in a sense: "HEPS for the period has also been adversely affected by higher than expected industry cost inflation, particularly for labour, diesel and electricity." Perhaps diesel prices, those will fluctuate the most of these three costs.


But wait, it gets worse than this, because as a result of "a loss of R256 million resulting from revaluation of the Company's investment in Wesizwe Platinum Limited and once-off accounting charges of R388 million (post-tax) and R505 million (post-tax)for the writedown of the Tumela 4 shaft project and suspension of Marikana operations respectively," basic earnings per share are expect to show a loss of between 175 to 185 cents. Ouch. Like I said when Aquarius announced that they were mothballing shafts, we tend to just shrug our shoulders, but on more emotive issues, such as a painting, well then we will march. I suppose the one is linked to the economic woes of Europe (Amplats product), but the other we should be talking about. And raising the issues around higher wages linked to productivity. I mean, why not?