Harmony increases revenue due to a higher gold price

Harmony Gold Mining Company has issued a trading statement for the year ended 30 June 2020 as the company is sure that the financial results for the period to be reported upon next will differ by at least 20% from the financial results for the previous corresponding period.

Harmony’s basic earnings for FY20 will be higher than for the year ended 30 June 2019 primarily due to:

  • an increase in revenue due to a higher gold price;
  • lower depreciation in FY20 compared to FY19;
  • lower impairment of assets due to no impairment being recognised in FY20; offset by
  • a higher reported translation loss on the US$ denominated debt at 30 June 2020, and
  • a derivative loss recorded in FY20 compared to a gain in FY19.

Earnings per share (EPS) are expected to improve to a loss of between 148 and 180 South African cents per share – which is an improvement of approximately 64% to 70% on the loss of 498 South African cents per share reported for the previous comparable period.

Headline earnings per share (“HEPS”) are expected to be a loss of between 139 and 169 South African cents, which represents a year-on-year decrease of between 168% and 183% from the HEPS of 204 South African cents reported in the previous comparable period.

The expected movements in earnings for FY20 compared to the previous corresponding period are due mainly to:

The increase in the gold price received from R586 653/kg in FY19 to R735 569/kg in FY20 contributed to the revenue increase from R26.9 billion for FY19 compared to R29.2 billion in FY20. In US dollar terms the increase in the gold price received from US$1 287/oz in FY19 to US$1 462/oz in FY20 and the weakening of the exchange rate from R14.18/$ to R15.66/$ contributed to the decrease in revenue from US$1.89 billion for FY19 compared to R1.87 billion in FY20.

A depreciation charge of R3 508 million (US$224 million) was recorded in FY20 (compared to R4 054 million (US$286 million) for FY19). The lower charge for FY20 was mainly due to the impact that the South African national COVID-19 lockdown had on production levels.

No impairment was recorded in FY20 compared to R3.9 billion (US$276 million) recorded in FY19.

A translation loss of approximately R919 million (US$59 million) was recognised on the US$ denominated debt as at 30 June 2020, compared to a translation loss of R78 million (US$6 million) recorded in the previous comparable period. The translation loss is primarily the result of the weakening of the Rand exchange rate against the US Dollar.

Included in FY20 were derivative losses of close to R1.7 billion (US$107 million) compared to gains of R484 million (US$34 million) in FY19. The derivative losses are primarily as a result of the weakening of the Rand exchange rate against the US Dollar and the strengthening of commodity prices during FY20, which negatively impacted on the derivative valuations.

Leave a Reply

Your email address will not be published.