Shares in platinum miner Sylvania Platinum (SLP:AIM) fell 3.8% to 63.1p despite the company reporting soaring revenue and profit and raising the prospect of a ‘windfall dividend’.
In its results for the year to 30 June 2020, the company reported a 62% rise in revenue to $114 million and a 125% jump in net profit to $41 million on the back of significantly higher platinum group metal (PGM) prices, in particular PGM metals rhodium and palladium.
It came as annual production fell 4% to 69,026 ounces, mainly due to around 10,000 ounces of production lost as a result of Covid-19 lockdown regulations.
Rhodium and palladium are key metals in catalytic converters, located in a box on the exhaust pipe under a car, and their prices have soared in the past year as demand far outstrips supply with tightening emissions regulations compelling automakers to buy more and more of the metals.
SYLVANIA CONSIDERS ‘WINDFALL DIVIDEND’
Sylvania also declared a final dividend 1.6p per share, up from 0.78p per share the previous year and equating to a yield of around 3.6%.
In addition, Sylvania is considering the payment of a ‘metal price windfall dividend’ in the third quarter of its 2021 financial year.
This windfall dividend payment will be based on excess cash flow generated from palladium and rhodium prices achieved above long-term broker consensus prices for the metals for the 2020 calendar year.
INVESTORS DISAPPOINTED
However, it appears investors were a little underwhelmed by today’s dividend announcement, given the company’s strong balance sheet.
With the soaring PGM prices, operating cash generation jumped to $58 million, Sylvania’s cash balance subsequently swelled to $55.9 million. The company remains debt-free, while its current assets of $89.2 million far outweighed current liabilities of just $9 million.
Speaking to Shares, Sylvania’s finance director Lewanne Carminati acknowledged investors may be disappointed by the size of the dividend, but said the payout was in line with the company’s dividend policy.
She added, ‘We’ve had to take into account our future working capital, our growth capital, potentially a second wave of Covid, and the ability to sustainably pay our dividend going forward.’
