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Harmony Gold Posts Loss in Q4 - Analyst Blog

Posted
8/19/2013 12:25:00 PM
By: Zacks.com
Referenced Stocks:ABX;GG;HMY;NEM;PNG

Harmony Gold Mining Co. Ltd. ( HMY ) recorded a net loss of 20 cents per share in fourth-quarter fiscal 2013 (ended Jun 30, 2013), compared with earnings of 2 cents per share recorded in the year-ago quarter.

For fiscal 2013, the company recorded a net  income of 5 cents per share, compared with earnings of 74 cents per share recorded in fiscal 2012.

On a reported basis, Harmony Gold logged a net loss from continuing operations of $370 million in the fourth quarter as against net loss from continuing operations of $8 million in the prior-year quarter. The loss resulted from $289 million of impairment charges related to the reduction in the U.S. dollar, gold and silver prices, and Hidden Valley's poor production performance. The loss also resulted from a deferred tax asset expense of $55 million, which was recorded following the de-recognition of the Hidden Valley deferred tax asset as it is no longer deemed recoverable in the current gold price environment.

For the full year, Harmony Gold recorded a net loss from continuing operations of $303 million as against net income from continuing operations of $266 million in 2012. The loss resulted mainly due to the impairment of the Hidden Valley asset and labor disruptions at Kusasalethu and its subsequent temporary closure.

Revenues and Costs

Revenues decreased roughly 24% year over year to $369 million in the fourth quarter from $485 million registered in the year-ago quarter. For fiscal 2013, revenues decreased 7.7% to $1,803 million from $1,953 million in 2012.

Gold production increased 12% year over year to 276,109 ounces (oz), primarily due to the step-up of production at Kusasalethu, after the labor unrest at the mine during the second to fourth quarters of the financial year. However, for the full year, gold production decreased 2.5% year over year to 1,137,297 oz from 1,166,203 oz primarily due to the labor disruptions at Kusasalethu during Dec 2012, Mar 2013 and Jun 2013 quarters.

Cost of sales increased 59.6% year over year to $653 million in the fourth quarter. For full-year 2013, cost of sales increased 19.5% to $1,866 million from $1,561 million in 2012.

Gross loss amounted to $284 million in the reported quarter compared with a gross profit of $76 million registered in the year-ago quarter. For the full year, gross loss amounted to $63 million from $392 million in 2012.

Financial Overview

Cash and cash equivalents decreased 3.2% to $209 million as of Jun 30, 2013 from $216 million as of Jun 30, 2012.

Cash flow generated from operating activities was $10 million as of Jun 30, 2013, compared with $126 million as of Jun 30, 2012. For fiscal 2013, cash flow from operating activities was $325 million compared with $545 million for fiscal 2012.

Outlook

Harmony Gold is making good progress with the cost cutting project, Project 400. The company has reduced its capital expenditure guidance for fiscal 2014 by R2.1 billion ($207 million) - a R650 million ($64 million) reduction in year-over-year capital  spending.Corporate and service costs have been trimmed by R450 million ($44 million). The capital expenditure savings were mainly due to less capital being spent in Papua New Guinea (PNG). The company's strategy has been consistent to optimize operational delivery, grow cash flow and share profits with all its stakeholders.

Harmony Gold, which is among the prominent gold miners along with Barrick Gold Corporation ( ABX ), Newmont Mining Corporation ( NEM ) and Goldcorp Inc. ( GG ), has world-class mines in South Africa and PNG.

Harmony Gold currently carries a Zacks Rank #5 (Strong Sell).



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