African Rainbow Minerals Braces for Sharp Decline in Half-Year Headline Earnings

African Rainbow Minerals (ARM) has warned of a substantial drop in headline earnings for the first half of its 2025 financial year, as weaker commodity prices and rising costs weighed on its performance.

The mining group, founded by billionaire businessman Patrice Motsepe, released a trading update on Tuesday, 26 February 2025, cautioning shareholders about an anticipated earnings slump for the six-month period ending December 2024.

ARM expects its headline earnings for the period to decline by 45% to 55%, landing between R1.33 billion and R1.63 billion. Consequently, headline earnings per share are projected to fall within the range of 678 cents to 829 cents.

According to the company, this downturn is largely attributed to a 22% drop in average realised US dollar iron ore prices, lower iron ore and manganese ore sales volumes, higher cash costs, and an unfavourable rand/US dollar exchange rate. The negative impact of these factors was somewhat cushioned by increased platinum group metals (PGM) production.

Basic Earnings Show a Contrasting Trend

Unlike headline earnings, ARM’s basic earnings are expected to rise by 8% to 18%, reaching between R1.31 billion and R1.44 billion. Basic earnings per share are forecasted to range between 670 cents and 732 cents, marking a notable increase from 620 cents per share in the previous year.

The company attributed the divergence between its basic and headline earnings to impairment charges. In the first half of its 2024 financial year, ARM reported impairments totaling R1.74 billion. By contrast, for the first half of 2025, impairment charges are anticipated to be significantly lower at around R136 million.

Key Impairments for H1 2025

ARM outlined the following impairments included in its basic earnings:

• R96 million after-tax impairment of property, plant, and equipment at Beeshoek.
• R36 million impairment on Assmang’s investment in Sakura Ferroalloys, with no tax effect.
• R4 million after-tax impairment of property, plant, and equipment at Cato Ridge Works.

Financial Struggles Persist

The latest half-year earnings downturn continues a broader financial decline for ARM. The company’s 2024 financial year was marred by falling platinum and coal prices, which significantly dented its bottom line.

Revenue for the full year dropped nearly 20%, with sales declining by 22% and costs rising by 19.3%. As a result, ARM’s annual profit plummeted 75% to R2.30 billion, down from R9.32 billion in 2023.

Earnings per share saw a sharp 61% decline to 1,604 cents, while headline earnings per share decreased by 43% to 2,591 cents. The company cited lower PGM and coal prices as the primary drivers of the downturn, though a weaker rand and stronger iron ore prices provided some relief.

ARM is set to release its full 2025 half-year financial results on Friday, 7 March 2025, providing further details on its performance and outlook.

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