11th May 2015 06:43
LONDON (Alliance News) - Lonmin PLC Monday said its pretax loss for the first half of the year narrowed despite revenue being hurt by lower commodity prices, as the company focuses on reducing expenditure and costs in preparation for lower prices for a minimum of two years.
The FTSE 250 miner reported a pretax loss of USD118 million in the six months ended March 31, narrower than the USD278 million loss in the first half of the 2014 financial year, as a decline in revenue was offset by fewer impairments.
A year earlier the miner recorded a USD160 million impairment of financing provided to Lexshell 806 Investments (Proprietary) Ltd in relation to the acquisition of Incwala Resources (Proprietary) Ltd, something that didn't repeat in the recent period.
Revenue tumbled to USD508 million from USD578 million due to lower commodity prices, as the company continued to focus on reducing costs to make its operations more profitable.
In a separate statement, Lonmin said refined platinum production in the second quarter was 122,480 ounces whilst sales came to 119,051 ounces. Refined production in the first half as a whole was 262,303 ounces, up 2% year on year, with platinum sales up 0.9% to 265,940 ounces.
Lonmin's loss before interest, tax, depreciation and amortisation in the half year was USD6 million, compared to a USD62 million loss a year earlier. The company's Ebitda before impairment of goodwill, intangibles and property came in at USD8 million, falling from USD103 million.
The company recently announced it will look to cut 3,500 jobs to reduce labour costs by 10%. The company is hoping to conduct the downsizing on a voluntary basis, but said it is preparing for lower commodity prices for a minimum of two years.
"We have continued to make good progress in a tough platinum group metal pricing environment. I am encouraged by our ongoing efforts to manage the controllables including the constructive dialogue through engagement with the unions to reduce costs including labour costs," said Chief Executive Ben Magara.
In addition, the company said it will reduce its capital expenditure budget to around USD150 million per year over the coming two years, whilst maintaining sales of around 750,000 platinum ounces per year. For 2015 the company will reduce its capital expenditure to USD160 million from the previous guidance of USD185 million.
"We have been, and will continue to use the operational and capital expenditure levers within our control to reduce costs and preserve cash to navigate the effects of a low platinum group metal price environment," said Magara.
Lonmin reiterated its full-year guidance to produce 750,000 platinum ounces in the full year with sales expected to total around 730,000 ounces, alongside maintaining its current cash cost.
By Joshua Warner; [email protected]; @JoshAlliance
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