Harmony Gold Swings to Profit in Q3 - Analyst Blog

Harmony Gold Mining Co. Ltd. HMY recorded earnings of 1 cent per share in third-quarter fiscal 2014 (ended Mar 31, 2014) compared with loss of 5 cents per share recorded in the year ago quarter and a loss of 2 cents in second-quarter fiscal 2014.

Revenues and Costs

Revenues decreased roughly 10.4% year over year to $354 million in the third quarter from $395 million registered in the year-ago quarter and declined 11.9% sequentially.

Gold production increased 8.7% year over year to 269,035 ounces (oz). However, gold production decreased 12% from 305,913 oz recorded in the previous quarter. The sequential decline was a result of production stoppages at Doornkop due to an accident in Feb 2014, flooding of the shaft bottom at the Joel mine, and a slower turnaround and technical issues at the Kusasalethu operation.

Operating profit for the third quarter was $1 million compared with operating loss of $20 million a year ago and a loss of $12 million in the previous quarter.

Gold ounces sold rose 13.3% year over year to 273,344 oz. However, gold ounces sold decreased 13.2% from 315,014 oz recorded in the prior quarter.

Cost of sales decreased 9.5% year over year to $332 million in the third quarter. Cash operating costs decreased 21.9% year over year to $987 per oz but increased 4% sequentially from $949 per oz. All-in-sustaining costs also went up 0.2% to $1,224 oz from $1,222 per ounce recorded in the prior quarter.

Financial Overview

Cash and cash equivalents decreased 43.5% to $190 million as of Mar 31, 2014, from $336 million as of Mar 31, 2013. Cash flow generated from operating activities was $70 million as of Mar 31, 2014, compared with $23 million as of Mar 31, 2013.
 
Outlook
 
Harmony Gold has made several structural changes in the company which will enable management to take necessary actions for the unplanned events which are likely to hinder production. The company's planning strategy will shift the focus toward de-bottlenecking and optimization, which are expected to increase the company's margins. Harmony Gold remains committed to increasing its profits and cash flow to enable it to pay dividends in future.

Harmony Gold currently carries a Zacks Rank #2 (Buy).

Other stocks in the gold mining industry worth considering include AngloGold Ashanti Ltd. AU, Gold Fields Ltd. GFI and Lake Shore Gold Corp. LSG. While AngloGold and Gold Fields carry a Zacks Rank #1 (Strong Buy), Lake Shore Gold holds a Zacks Rank #2 (Buy).