Harmony expects up to 72% drop in interim earnings
JSE-listed gold miner Harmony Gold expects its basic earnings for the first half of its 2022 financial year, ended December 31, 2021, to be between 68% and 72% lower than that of the six months ended December 31, 2020.
This is primarily the result of several factors, including a nonrecurring gain on the bargain purchase recognised for the acquisition of the assets and liabilities of Mponeng operations and related assets in the first half of the 2021 financial year.
It is also owing to a lower gross profit as a result of higher production costs, which offset the increase in production and revenue; a translation loss on the dollar-denominated debt at period’s end, compared with a gain at December 31, 2020; and a derivative loss recorded during the period under review, compared to a gain in the prior corresponding period.
The decrease in earnings was partially offset by the decrease in the taxation expense as a result of changes in the use of unredeemed capital allowances and assessed losses.
Further, as a result of a correction of an error related to deferred taxation and the conclusion of the International Financial Reporting Standards 3 fair value and accounting exercise related to the acquisition of Mponeng operations and related assets, Harmony has restated its 2021 interim results.
As such, the expected movements in earnings for the first half of the 2022 financial year when compared with three months of the first half of the 2021 financial year are owing mainly to production costs, which increased mainly as a result of the inclusion of six months of costs in respect of Mponeng and related assets during the period in comparison to the first quarter.
Inflationary increases also impacted on various facets such as labour and consumables costs.
In addition, a foreign exchange translation loss of about R298-million ($20-million), compared with a R652-million gain ($40-million) in the period under review is mainly owing to the rand having weakened against the dollar.
Included in the period under review were derivative losses of nearly R35-million ($2-million), compared with gains of R902-million ($56-million) in the comparative period of the prior year. The derivative losses are primarily a result of the weakening of the rand against the dollar.
Altogether, Harmony reports, these factors resulted in the increase of assessed losses and unredeemed capital expenditure, thereby leading to a lower deferred tax expense.
As such, Harmony’s earnings a share are expected to be between 68% and 72% lower at between R2.14 ($0.15) and R2.45 ($0.18) apiece on the restated earnings of R7.63 apiece for the comparative period.
Headline earnings a share are expected to be between 62% and 67% lower, at R2.33 ($0.15) and R2.68 ($0.18) from the restated headline earnings a share of R7.13 reported for the first half of the 2021 financial year.
Harmony reports that headline earnings exclude the gain on bargain purchase (from acquisitions) recorded in the first half of the 2021 financial year.
Harmony will publish its financial results for the period on February 28.
