Sibanye-Stillwater shares crashed to pre-listing lows on Thursday after reporting its most difficult annual results, plunging into a deep loss, with high debt and reduced cash flow forcing the company to withhold its final dividend for the first time since its debut in 2013.
Sibanye’s shares fell a hefty 15.5% on Thursday to R11.42, well below the R13.05 it started trading at when it listed on February 11 2013. The company will give investors four shares for every 100 they hold in lieu of a final cash dividend.
During a results presentation, some analysts flagged their concerns about the high levels of debt, with net debt of R23.2bn compared with a market capitalisation of R24.8bn, prompting questions about Sibanye’s ability to repay it within the two to four year target period.
Sibanye, which had boasted of setting itself apart from its peers by paying industry leading dividends, reported an attributable loss of R4.4bn for the year to end-December compared with attributable earnings of R3.5bn a year earlier.
“The poor numbers from the gold business, higher interest charges and other expenses have resulted in a sharp drop in normalised profits and free cash flows,” Nedbank analysts Leon Esterhuizen and Arnold van Graan said.
Sibanye CEO Neal Froneman said the company could realise $500m from streaming the platinum production at its Stillwater operation in the US. Streaming is essentially being paid cash upfront for regular future deliveries of metal, which in this case would be the by-product of palladium production.
The streaming arrangement would add an additional layer of complexity to Sibanye, Esterhuizen and Van Graan said.
Other analysts asked pointed questions about the wisdom of buying cash-strapped and debt-laden Lonmin, adding marginal mines to Sibanye in an all-share deal at a time when the rand has strengthened and thinned profit margins for mining companies operating in SA.
“Are we happy buyers? I am ecstatic,” Froneman said, prompting Citi analyst Johan Steyn to ask if he thought shareholders were as thrilled with the Stillwater deal seeing the poor annual share performance.
Froneman publicly warned Lonmin management to ensure their turnaround strategy at its marginal mines was effective and that it was able to repay debts as Sibanye shareholders would not vote their approval of acquiring a “black hole” firm. – BusinessLive