Harmony Gold Meets Est, Grows Y/Y

Harmony Gold Mining Co. Ltd. (HMY - Analyst Report) recorded net earnings of 30 cents per share in the second quarter of 2012, significantly higher than 16 cents per share in the previous quarter and 11 cents per share in the year-ago quarter. However, results were in line with the Zacks Consensus Estimate.

Revenue                                                       

Revenues were up 8.2% sequentially and 37.1% annually to $595 million, driven by a rise in the gold price received and an increase in gold sold.

Costs

Gold production increased by 5% sequentially to 344,592 ounces. Cost of sales plunged 7.8% sequentially to $412 million, but jumped 13.2% over the previous year quarter. Total production cost was $339 million in the reported quarter versus $367 million in the previous quarter and $308 million in the comparable year-ago quarter. Gross profit in the quarter was $183 million versus $103 million in the previous quarter and $70 million in the year-ago quarter.

Financial Overview

Cash and cash equivalents amounted to $149 million as of December 31, 2011 versus $127 million as of December 31, 2010.

Cash flow generated from operating activities was $173 million as of December 31, 2011 versus $62 million as of December 31, 2010.

Outlook

The company is showing a significant progress both in the growth of resources as well as diversity. Harmony remains focused on its long term strategic goal of achieving sustainable profitability and delivering shareholder value.

The company remains bullish on the gold price and expects gold price in dollar terms to continue to strengthen, as the fundamentals that drove the gold price up are still in place and the global financial markets have not yet stabilized.

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 also 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. However, the company faces stiff competition from Arcelor Mittal (MT - Analyst Report) and POSCO (PKX - Analyst Report).

Currently, we have a long-term (6 months and higher) Neutral recommendation on the stock.

Read the full analyst report on PKX

Read the full analyst report on MT

Read the full analyst report on HMY