Sibanye Stillwater (SBSW) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue decreased by 22% to R70 billion compared to the same period in 2021, primarily due to a three-month industrial action at South African gold operations and lower commodity prices across all operations [112] - Profit for the period was R12.3 billion, marking the third highest profit for a half year since inception, with normalized earnings at R11.2 billion, translating to earnings per share of R0.0426 [113] - The net cash position was maintained at 0.16 times net cash to adjusted EBITDA, indicating a robust financial position despite operational challenges [109] Business Line Data and Key Metrics Changes - South African PGM operations saw an 8% reduction in output compared to the previous year, with total unit costs increasing by 7%, which is in line with inflation but below mining inflation of approximately 12% [72] - The gold operations experienced significantly lower production output due to industrial action and remediation efforts, with production forecasted to improve in the second half of the year [56][57] - The recycling segment reported a 10% decline in recycled ounces compared to the first half of 2021, influenced by flooding incidents and reduced underground concentrate [101] Market Data and Key Metrics Changes - Battery electric vehicle sales in H1 2022 increased by 75% year-on-year, indicating strong demand despite supply chain issues [42] - The forecast for light-duty vehicles was revised down to about 80 million units for the year, reflecting a nearly 10% reduction from original forecasts due to semiconductor shortages and inflationary pressures [81] - Jewelry demand, particularly in China, remains under pressure due to challenging macro conditions [83] Company Strategy and Development Direction - The company has developed a three-dimensional strategy focusing on harnessing opportunities and managing complexities in the current environment, emphasizing innovation and sustainability [21][25] - The strategic differentiators include building a unique portfolio of green metals and being recognized as a force for good, which aligns with the company's commitment to carbon neutrality and decarbonization [23][24] - The company is positioning itself in regional supply chains rather than global ones to mitigate risks associated with geopolitical events and supply chain disruptions [35][36] Management's Comments on Operating Environment and Future Outlook - Management highlighted the challenges posed by the Russia-Ukraine conflict, which has accelerated inflationary pressures and impacted consumer spending power [34] - The company remains optimistic about the long-term prospects of battery metals, despite short-term challenges, and is focused on improving operational efficiencies [44][100] - Management emphasized the importance of aligning wage increases with inflation to ensure long-term sustainability and competitiveness [68] Other Important Information - The company declared an interim dividend of R1.38 per share, amounting to R3.9 billion, which is at the top end of its dividend policy [109] - The investment in the Keliber lithium project in Finland is expected to produce some of the greenest lithium in Europe, supporting the company's green metal focus [38][40] - The company is progressing with its PGM recycling facility to capture a significant part of the European recycling market [53] Q&A Session Summary Question: What are the impacts of the flood event in Montana? - The flood event impacted the Stillwater mine for seven weeks, resulting in an estimated loss of 60,000 2E ounces for the first half of 2022 [91] Question: How is the company addressing skill shortages in Montana? - The company is focusing on recruitment, retention, and training to address significant skill shortages and high turnover rates [93] Question: What is the outlook for the PGM market? - The PGM market outlook remains volatile, with supply disruptions due to geopolitical events and a forecasted slight deficit in palladium demand and a slight surplus in platinum [84][77]