Electric cars no ‘major disrupter’ to platinum business (Business Day TV – July 26, 2016)


Chris Griffith is CEO of Anglo American Platinum.

BUSINESS DAY TV: Free cash flow is up and net debt is down, but so too are first half profits. Anglo American Platinum continues to refocus its business in a tough environment. Joining me on News Leader with more is CEO Chris Griffith.

Chris … so interim headline earnings are down 58% to just over R1bn. Profit from lower metal prices though in the previous year did have an extraordinary item and that really skews the end result, doesn’t it?

CHRIS GRIFFITH: That’s correct. Last year, in the first half of the year, we had a massive stock gain which added about R2.2bn to earnings. And if you compare a stock gain that we had in this first half of the year of about R0.6bn, you see a net difference between the two periods of R1.6bn.

So, the best way to think about our earnings, if you exclude those, you see that ebit (earnings before interest and taxes) went up from R1.3bn to R1.5bn. That’s the best way to see … and you can see then, notwithstanding lower metal prices, we actually managed to increase the earnings of the company if we exclude these two once-off events.

BDTV: So is this the restructuring effects that you started a couple of years ago, starting to kick in at the moment?

CG: Particularly if you look at the net debt reduction that you pointed out to. So we were able to reduce in a falling price environment, not by chasing massive increases in volume, we were able to increase the amount of earnings. So we generated R3.2bn of operating free cash flow and that you can see is the benefit of all the restructuring we’ve done over the last couple of years. You are also seeing unit costs pretty much flat.

So unit costs in a mining environment, where we see mining inflation about 7.8%, we were increasing unit costs in the first half of this year by 1.8% and that I believe is a clear indication that we’re generating cash, notwithstanding lower prices, and we’re doing that by just operating substantially more efficiently.

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