Sibanye Gold Ltd. :SBGL-US: Earnings Analysis: 2016 By the Numbers : March 1, 2017

Sibanye Gold Ltd. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Sibanye Gold Ltd. – Newmont Mining Corporation, Barrick Gold Corporation, AngloGold Ashanti Limited Sponsored ADR, DRDGOLD Limited Sponsored ADR, Harmony Gold Mining Co. Ltd. Sponsored ADR and Gold Fields Limited Sponsored ADR (NEM-US, ABX-US, AU-US, DRD-US, HMY-US and GFI-US) that have also reported for this period.

Highlights

  • Gross margins widened from 10.91% to 20.76% compared to the same period last year, operating (EBITDA) margins now 32.88% from 26.58%.
  • Year-on-year change in operating cash flow of 27.57% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 2155.61 1771.5 2004.68 1990.34 2024.82
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 255.41 55.9 142.8 174.25 364.46
Earnings Growth (YOY) 356.87 -60.85 -18.05 -52.19 2.3
Net Margin 11.85 3.16 7.12 8.75 18
EPS 1.11 0.24 0.67 1.05 1.99
Return on Equity 23.35 4.94 13.01 N/A N/A
Return on Assets 10.48 2.64 6.61 8.24 15.81

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 10.91% to 20.76% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 26.58% to 32.88% compared to the same period last year. For comparison, gross margins were 10.91% and EBITDA margins were 26.58% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SBGL-US‘s change in operating cash flow of 27.57% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 9.70% to 19.94% and (2) one-time items. The company’s pretax margins are now 14.41% compared to 3.52% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Sibanye Gold Ltd. operates as a gold mining company, which is primarily involved in underground and surface gold mining and related activities, including, extraction, processing and smelting. It holds interest in the Kloof Driefontein Complex located in the Gauteng Province, the Beatrix Gold Mine located in the Magisterial District of Westonaria, Cooke Operations in the West Wits Basin and Driefontein Operations situated near the town of Carletonville in the Gauteng province. Sibanye Gold was founded on December 12, 2002 and is headquartered in Westonaria, South Africa.

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