Zacks_Analysts' Blog : Harmony Reports 4Q Loss - Analyst Blog

Harmony Gold Mining Co. Ltd. (HMY) recorded net loss of 1 cent per share in the fourth quarter ended June 2011 versus last quarter’s profit of 8 cents per share.

In fiscal year 2011, the company reported net earnings of 21 cents versus a net loss of 6 cents in fiscal year 2010.

Revenue

However, revenues were up 22.0% sequentially to $505 million versus $422 million in the prior quarter and up 25% year over year from $404 million. The increase in revenue was driven by a rise in the gold price received, offset by a decrease in gold sold.

In fiscal year 2011, revenues were up 19.6% year over year to $1,781 million.

Costs

Gold production increased 3.0% sequentially to 326,394 ounces. Cash operating costs increased mainly due to higher electricity and stores costs. Cash operating profits upped 5% to $133 million, as the increase in revenue was offset by a surge in production cost.

Cost of sales jumped 37.3% sequentially to $515 million and about 46.3% over the previous year. Total production costs increased to $370 million in the reported quarter versus $295 million in the prior-year quarter and $275 million in the comparable year-ago quarter. Gross loss in the quarter was $10 million versus a gross profit of $47 million in the prior-year quarter and a gross profit of $52 million in the year-ago quarter.

Financial Overview

Cash and cash equivalents amounted to $102 million as of June 30, 2011 versus $97 million as of March 31, 2011.

Cash flow from operations was $151 million as of June 30, 2011 versus $35 million as of March 31, 2011 and $108 million as of June 30, 2010.

Outlook

The company is showing significant progress both in the growth of resources as well as diversity.  The company is focused on continuing to deliver on its long-term targets and maximizing shareholder value.

Harmony has significantly improved the quality of its production, which it will continue to do with better cash costs and free cash flow in future. The company has several world-class mines in South Africa, which are currently in the build-up phase and these together with Hidden Valley, will be significant contributors to Harmony’s set production targets.

The company competes with Newmont Mining Corp. (NEM) and AngloGold Ashanti Ltd. (AU).

Currently, Harmony has a short-term (1 to 3 months) Zacks #5 Rank (Sell), but a long-term (6 months and higher) Neutral recommendation.