Harmony Gold's (HMY) Q4 Earnings Reverse Year-ago Loss

Zacks Equity Research

Harmony Gold Mining Co. Ltd. (HMY) recorded earnings of 3 cents per share in fourth-quarter fiscal 2014 (ended Jun 30, 2014) compared with a penny per share in third-quarter fiscal 2014, while contrary to a loss of 20 cents per share recorded in the year-ago quarter.

On a reported basis, net loss was $116 million in the quarter versus a loss of $370 million reported a year ago. The company took an impairment charge of $134 million in the reported quarter, mostly related to its Phakisa operation.

For fiscal 2014, earnings came in at 2.5 cents per share compared with 5.9 cents per share in fiscal 2013.

The company’s shares rose 1.9% in the trading session following the earnings release. The stock pulled back to close at $3.12 on Aug 14, losing around 1%.

Revenues and Costs

Revenues decreased roughly 3% year over year to $358 million in the fourth quarter from $369 million registered in the year-ago quarter but increased 1.1% sequentially. For fiscal 2014, revenues were $1,515 million, down 16% from $1,803 million in fiscal 2013.

Gold production rose 4% year over year and 6.8% sequentially to 287,266 ounces (oz). For fiscal 2014, production increased 3% year over year to 1,171,987 oz. The full-year production increased due to a 4% decline in all-in sustaining costs.

Operating loss for the forth quarter was $136 million compared with operating loss of $344 million a year ago and a profit of $1 million in the previous quarter.

Gold ounces sold rose 6% year over year to 277,621 oz and were up 1.6% from the sequential quarter.

Cost of sales increased 41.3% sequentially but decreased 28.2% year over year to $469 million in the fourth quarter. Cash operating costs decreased 12.5% year over year to $1,011 per oz but increased 2.4% sequentially from $987 per oz. All-in-sustaining costs went up 3.5% to $1,267 per oz from $1,224 per oz recorded in the sequentially prior quarter.

Financial Overview

Cash and cash equivalents decreased 17.7% to $172 million as of Jun 30, 2014, from $209 million as of Jun 30, 2013. Cash flow generated from operating activities was $45 million as of Jun 30, 2014, compared with $10 million as of Jun 30, 2013.
 
Outlook

 
Harmony Gold has made several strategic changes to ensure future growth and profitability; these are expected to lower the company’s debt and allow it to have financial flexibility and be highly geared against the gold price.

The company’s five year strategy is to improve its margins by implementing its plans and increase free cash flow through higher grades, cost control and grow the value per share of its PNG assets by completing the Golpu studies with the plan of building the Golpu mine.

Harmony Gold plans to identify acquisition opportunities of open pit mines and bulk projects. Further, it also remains committed to its target of positioning itself as a competitive value focused gold mining company.

Harmony Gold,  a prominent gold mining company along with AngloGold Ashanti Ltd. (AU) and Gold Fields Ltd. (GFI), currently carries a Zacks Rank #2 (Buy).

Another stock in the gold mining industry worth considering is Pretium Resources Inc. (PVG), holding the same rank as Harmony Gold.
 

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Read the Full Research Report on HMY


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