Lonmin Beats Earnings Estimates, Sees ‘Flat’ Prices in 2012

Lonmin Plc, the world’s third-largest platinum producer, beat fiscal full-year profit estimates as demand for metals and prices rose.

Earnings excluding one-time items climbed 64 percent to $226 million, or 112 cents a share, in the year through September, from $138 million, or 70 cents, a year earlier, the London-based company said today in a statement. That beat the 84-cent median estimate of 18 analysts surveyed by Bloomberg.

Platinum producers have benefited from rising demand for diesel engine catalysts in Europe and jewelry in China. A 6.9 percent jump in average prices for the metal in the period drove up profit at Lonmin even after a strike at the Karee operation in South Africa and several fatal mine accidents curbed output.

“Our operational and financial performance have delivered a solid performance, despite seeing two months of serious disruption, caused by an illegal strike and by a very sad series of fatalities,” Chief Executive Officer Ian Farmer said in the statement. Cost increases also remained “an issue,” he said.

Platinum prices, which averaged $1,761.77 an ounce in the period, will stay “flat” until the end of 2012 as global economic instability takes precedence over supply and demand fundamentals, Farmer said on a conference call.

Feel the Pressure

“While the world is in a period of questionable growth, the platinum market will feel the pressure,” Michael Kavanagh, analyst at Religare Capital Markets, said by telephone from Cape Town. “It makes planning for these companies very difficult.”

Sales volumes rose 2 percent to 721,000 refined platinum ounces, Lonmin said. The company initially planned sales of 750,000 ounces before cutting the figure by 30,000 ounces after the strike and safety stoppages. It’s targeting fiscal 2012 sales of 750,000 ounces.

The company forecast 2012 capital spending of $450 million, 10 percent more than previous guidance, as part of a $2 billion plan to expand output to 950,000 ounces in 2015. “We intend to continue investing in growth,” Farmer said on the call, adding that “spending may moderate if markets deteriorate.”

Lonmin declared a 15-cent dividend, matching the year-earlier payment. The stock rose as much as 1.5 percent to 1,090 pence in London, and traded at 1,083 pence as of 10:34 a.m. local time.

Xstrata Plc owns about 25 percent of Lonmin, which taps the Bushveld complex in northern South Africa, holder of the world’s richest platinum reserves. Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd. are the largest producers.

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