- Gold production decreased by 42% due to an industrial action
- Employees were demanding a R1000 pay rise
- In 2021 Froneman went home with R300 million
The graph below shows key financial highlights in billion Rands
Harare- Diversified mining company, Sibanye Stillwater recorded its first profit downturn post-COVID-19 pandemic era during the full year to December 2022 mainly due to industrial action over better remuneration. The strike lasted for three months. However, Neal Froneman, Chief Executive Officer for Sibanye Stillwater was against an increase in salaries citing incapacitation by the Company, leading to huge losses in gold revenue, losses that could have been avoided.
Circa 30 000 employees went on strike at Sibanye’s gold operations in April 2022 demanding a R1000 salary increase amid record high commodity prices, especially for gold, PGMS, and lithium at the international market and record declines for the Rand against major currencies. As a result, gold production stalled for three months resulting in a 42% decrease.
This, however, wasn’t the first industrial action encountered by Froneman that affected the profit outturn. PGMs workers also pledged solidarity with the gold workers. Between 2018 and 2019, there was a five-month strike which cut the Company’s gold revenue by 19%. Earnings before interest, taxes, depreciation and amortisation (EBITDA) also declined by 16%.
Due to economic uncertainties exacerbated by Russian aggression in Ukraine, incompetency by Eskom and controversial South African policy, most mining outfits increased salaries to cushion employees, including Sibanye’s rival Harmony Gold Ltd which agreed to pay its workers by a similar R1000 wage increase in 2021.
In FY2021, Froneman took home with R300 million in remuneration, far beyond employees’ demands at R1000. This means the CEO was earning R1500 per minute and R215 per second, even far more than the minimum wage of R23 per hour. It is against this, that CEO Froneman said an R1000 salary increase wasn’t justifiable, causing rage among both Workers' Unions and employees. His pay check alone was enough to pay 20 000 workers at a salary of R15 000 each.
Froneman, however, agreed to the pay-out but only at R800 and even threatened pay cuts and retrenchment for striking employees after the offer was rejected by the Workers’ Unions.
However, after circa four months of stalled production, Froneman finally accepted the R1000 wage rise but the damage has been already done. The company lost circa R40 billion in revenue against a demand of R1000 per circa 31 000 employees. The Group saved R32 thousand to lose R40 billion in revenue. Gold produced decreased from 33372 kgs for FY2021 to 19301 for FY2022. This was a whopping 42% decrease. As a result, the Group recorded a loss of 3.5 billion from a profit of R5.1 billion in 2021 in EBITDA.
This, with other headwinds from Nevada’s floods which stalled production at Montana operations by 7 weeks resulted in Earnings Per Share, (EPS) an industrial standard relied upon by investors to measure the efficacy of a company, declining significantly to 651 cents from 1140 in the prior year while Headline Earnings Per Share (HEPS) dwindled to 652 cents from 1272 cents in full-year 2021.
Group revenue declined by 20% to R138.3 billion compared to R172.2 billion in the prior year. Group adjusted EBITDA of R41.1 billion was 40% lower than the record adjusted EBITDA of R68.6 billion for 2021. Profit for the period also declined to R18.98 billion from 33.79 in 2021.
Froneman has been with Sibanye since its unbundling from Gold Fields Limited in 2013 and listed on the JSE and the NYSE as an independent company with three deep-level South African gold mines and a market capitalisation of approximately R10 billion. He was a strategic managing director who diversified the Group’s product portfolio into multinational diversified mining and metals processing sectors with projects and investments across five continents and with a market capitalisation more than 12-fold larger than it was in 2013.
Notably, in addition to the significant capital growth in the business, he returned over R40 billion in additional value to investors in the form of dividends and share buybacks, four times the initial market capitalisation on the listing.
He transformed the company to be one of the employment cornerstones in South Africa. In 2013, over 36,000 people including contractors were employed, however, by 2021, the number has increased to 85,000 worldwide.
However, against the recent struggles with employees of underpayments, it is controversial whether Froneman was practising good ethos to build the Sibanye empire or it was a horse-rider relationship where one exploited the other.
Despite 2022’s man-made and natural challenges faced, the Group, however, generated a positive free cash flow of R9.5 billion maintaining a strong financial position at year-end. Cash and cash equivalents of R26.1 billion exceeded borrowings of R20.2 billion. Consequently, an R5.9 billion net cash position was obtained.
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