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Gold Fields Expected to Have 1st Half Profit on Lower Costs -- Earnings Preview - Morningstar

Tuesday, 16 August 2016

JOHANNESBURG--South African miner Gold Fields Ltd. (GFI.JO) is expected to swing to profit and report higher revenue when it releases its half-year earnings on Thursday, as the company reaps the benefits of a higher gold price and lower costs, thanks to weak emerging-market currencies. Here's what to look out for:

EARNINGS FORECAST: Gold Fields is expected to report earnings per share of 14 cents during the six months to June 30, up from 0 cents during the same period in 2015, according to guidance issued by the company in July. Headline earnings per share, which strip out certain exceptional and one-off items, are expected to come in at 16 cents, versus 1 cent during the first six months of 2015.

REVENUE FORECAST: The miner's revenue during the first half of 2016 is expected to climb 16% from a year earlier to $1.47 billion, according to Thomson One. 

WHAT TO WATCH:

HIGHER PRICES: Higher gold prices have helped boost Gold Fields' stock by 103% since the start of 2016--a big turnaround from 2015, when the stock fell as much as 42% and ended the year down 21%. Investors will be watching to see what Gold Fields plans to do with the cash it's generating from sales of the yellow metal after cutting costs over the last few years to deal with a lower-for-longer price environment.

LOWER COSTS: Gold Fields has enjoyed lower operating costs in local currencies during the six months to the end of June, thanks to a 5% weaker Aussie dollar and 29% weaker South African rand from the same period a year ago. Still, all-in sustaining costs rose 6.5% to $1,023 an ounce in the second quarter from the first three months of the year, the company said in a trading statement. Investors will be watching for an update on cost containment as emerging-market currencies strengthen against a weaker U.S. dollar.

SOUTH DEEP: Investors will be eagerly awaiting an update on the performance of Gold Fields' fully mechanized but unprofitable South Deep mine, its only remaining asset in South Africa, including efforts to continue to reduce costs. Gold Fields previously said it expects the mine to be profitable by the end of this year--investors will be watching to see how far from profitability the mine still is.

 


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