Amplats final results December 2018
Net sales revenue for the year increased to R74.6 billion (2017: R65.7 billion), operating profit grew to R10.8 billion (2017: R6.6 billion), profit attributable to owners of the company rose to R6.8 billion (2017: R1.9 million), while headline earnings per share was higher at 2 893cps (2017: 1 482cps).
The Board has increased the dividend pay-out ratio policy from 30% to 40% of headline earnings, reaffirming Anglo Platinum's confidence in the future of the business and commitment to disciplined and balanced capital allocation. A second half cash dividend of R2.0 billion or R7.51 per share has been declared to our shareholders. The dividend applies to all shareholders on the register on 8 March 2019 and is payable on 11 March 2019. This brings the aggregate 2018 dividend to R3.0 billion or R11.25 per share, equivalent to a 40% pay-out on full year 2018 headline earnings.
The three major PGMs - platinum, palladium and rhodium - should again be in a combined deficit in 2019. Primary mine supply should remain flat, while tightening emissions regulations are likely to boost demand for palladium and rhodium in the light duty and platinum in the heavy-duty sectors. Platinum is expected to be in a modest surplus once again in 2019. The outlook for gross global automotive demand is more positive in 2019, with some growth possible. While the diesel engine's share of the European light vehicle market is expected to decline further, additional demand from the heavy-duty sector in China and India, due to stricter emissions regulations, could drive combined automotive demand higher. Industrial demand is likely to remain strong, but lower than 2018 as global economic growth moderates. The jewellery demand outlook remains mixed. There are some positive signs in China that jewellers could drive higher platinum sales but 2019 could still see a modest decline in demand before the market finally stabilises. In contrast, Indian demand should increase further, and we expect a robust performance in other key jewellery markets. Investment demand depends on price movements and volatility but should be positive, aided by continuing market development work from the World Platinum Investment Council. Primary supply should change little year on year, but recycling flows will increase marginally, all contributing to the modest surplus forecast for 2019.
Palladium should once again be in a strong and widening deficit in 2019. Automotive demand seems set to increase, even with little or no growth in vehicle sales, as average vehicle size increases and emissions rules tighten. Although palladium is trading at a substantial premium to platinum, there is little evidence of intensive efforts to replace palladium with platinum in any gasoline catalytic converters. Even if this R&D process were to start in earnest in 2019, gross automotive palladium demand would be likely to rise over the coming year. Mine production should be relatively flat year-on-year, but more palladium will be recovered from recycling. Over 500,000 ounces of net disinvestment from Exchange Traded Funds took place in 2018, without which palladium would have been in a very large deficit. Even if similar levels of disinvestment occur in 2019 which is unlikely given the current volume of ETFs available, palladium is still expected to remain in a deficit once again. Rhodium demand should be steady in 2019. Although vehicle sales are unlikely to grow this year, tighter emissions rules and rising vehicle sizes should translate to incremental automotive demand. Industrial demand could fall back due to some price sensitivity in the glass sector. Primary supplies are expected to remain relatively flat but the volume of metal recycled should climb in 2019, with rhodium likely to remain in a small fundamental surplus.
PGM production guidance (metal-in-concentrate) is 4.2-4.5 million PGM ounces for 2019, including platinum outlook of 2.0-2.1 million ounces and palladium outlook of 1.3-1.4 million ounces. Lower production versus 2018 reflects the Sibanye-Stillwater material changing to a tolling contract from 1 January 2019, and therefore refined metal is returned to Sibanye-Stillwater. Refined production will be higher at 4.6-4.9 million PGM ounces for 2019, including platinum of 2.2-2.3 million ounces and palladium of 1.4-1.5 million ounces. Refined production is higher than M&C due to the build-up of work-in-progress inventory after planned maintenance on Mortimer and Polokwane smelters in 2018, which will be processed in 2019. Sales volumes will be in line with refined production.
Unit cost guidance is between R21,000 and R22,000 per produced platinum ounce (metal-in-concentrate). The Company is committed to maintaining a strong balance sheet through the cycle, only focussing on high-returning and quick pay back projects. Total capital expenditure guidance for 2019, excluding capitalised waste stripping is R5.7 billion to R6.3 billion. Capitalised waste stripping guidance is R2.0-R2.2 billion. The Board has committed to paying a sustainable dividend based on a pay-out ratio of 40% of normalised headline earnings. The financial information on which the guidance is based on has not been reviewed or reported on by the Company's auditors.