Diversified commodities pay off in African Rainbow Minerals' 2020 year-end results

FD Abigail Mukhuba: The financial year was challenging, particularly around the onset of Covid-19.

African Rainbow Minerals’ (ARM) diversified commodities strategy has paid off as headline earnings were positively impacted by the contribution from the platinum group metals (PGM) operations, which increased by R1.4 billion. The group also reported an increase in cash generated from operations by R1.743 billion to R3.866 billion.

The higher PGM and iron ore prices more than offset the negative impact of lower manganese ore, manganese alloys and thermal coal prices experienced during the year. 

“The financial year was challenging, particularly in the second half of the year with the onset of Covid-19,” says ARM FD Abigail Mukhuba

Despite the impact of low prices in some commodities and Covid-19, the group reported a 6 percent increase in headline earnings to R5.534 billion. 

The weaker rand against the US dollar also contributed positively to the group’s headline earnings. 

“Being in a strong financial position during such times of uncertainty has enabled us to create value for our shareholders through the final dividend declared of R7 per share,” Abigail says. 

Along with improved headline earnings and dividends, the group also reported: 

  • Net cash improved by R1.189 billion to R3.790 billion
  • Segmental earnings before Ebitda increased by 16 percent to R11.009 billion
  • Basic earnings were R3.965 billion and include an attributable impairment of the ARM coal assets of R1.524 billion
  • ARM Platinum headline earnings increased by R1.030 billion to R1.142 billion
  • The company’s net asset value per share increased by 13 percent to R143.65 per share

Challenges and opportunities of going digital

With Covid-19 forcing people to work remotely, Abigail explains that the pressures of reporting doubled. “Reporting season is the highlight and most rewarding time of any finance team, but it is also the most challenging time under ‘normal’ circumstances,” she says. “The hours seemed to never end, and exercising self-control in terms of taking breaks and putting aside time for other activities proved challenging.” 

One of the challenges they were faced with was having to prepare reporting packs remotely. “Never take the value of sitting in the same room opposite each other to debate the accounting entries and some of the transactions for granted,” Abigail says. But they overcame the challenge by understanding and valuing the relationship within the team so that, even though they weren’t always in the same rooms, “there was a sense of connectedness and camaraderie to achieve the same objective”. 

As South Africa entered lockdown level 3, the ARM had to pay special attention to the rotation of teams that ended up physically at the office. “Firstly, we had to keep everyone safe and healthy, and secondly, we had to responsibly manage the disruption brought on by the change from working only at home, to working both at home and at the office in any week.”

Some members of Abigail’s finance team tested positive for Covid-19, but everyone has since recuperated and continued to deliver on their commitment to the team. “We are blessed to have team members that are so committed.”

However, the experience wasn’t all bad, as ARM realised the benefit of going 100 percent electronic instead of partial digitisation. “Covid-19 has forced us to accelerate the pace of digitising our processes, especially record keeping,” Abigail says.