GB Holdings Sees PGMs Price Recovery as Key to Improving Company Prospects
Zimbabwe Stock Exchange-listed rubber and chemicals manufacturer General Beltings (GB) Holdings is optimistic that the anticipated recovery in Zimbabwe’s mining sector, driven by a rebound in PGMs prices, will provide a significant boost to the company’s prospects in the near future.
By Ryan Chigoche
While the group reported a 13% increase in total volumes to 455 metric tonnes for the half-year period ending June 30, 2024, largely due to the market recovery efforts of Cernol Chemicals, the General Beltings Division’s own volumes declined by 37%.
For the same period, General Beltings’ division volumes totalled 127 metric tonnes, down from 203 metric tonnes in the comparable period. This decline was mainly attributed to weaker platinum prices, which led to reduced downstream demand for conveyor belts.
As a result, the total turnover for the period stood at ZWG 22 million, 15% lower than the ZWG 26 million reported in the same period last year, reflecting the mixed performance of both the rubber and chemicals divisions.
In a trading update for the half-year ended June 30, 2024, General Beltings Chairman Tichaona Mabeza expressed optimism that the recovery in the mining sector, spurred by rising mineral prices, would help improve the fortunes of the General Beltings unit.
“Although the challenges of the first half of the year were daunting, the anticipated recovery in the mining sector, through firming mineral prices, is a source of optimism as it underpins the fortunes of the General Beltings Division. The adverse effects of the El Niño-induced drought on power generation are pervasive and debilitating to the economy,” Mabeza said.
He also emphasized the critical power supply challenges and expressed hope that increased thermal power generation would help augment national grid supplies and, in turn, boost demand for the company’s conveyor belts.
“To ameliorate the current negative effects of the power supply deficit, there would be a need to augment power supplies with increased thermal power generation, thus increasing demand for conveyor belts from the General Beltings Division,” Mabeza added.
Weighed down by reduced income from the mining sector, the company’s gross profit for the first half of 2024 stood at ZWG 11 million, down 22%, reflecting both the lower turnover and reduced overhead recoveries.
Operating costs were reduced by 33%, totalling ZWG 11 million compared to ZWG 16 million in the same period last year. This reduction was attributed to cost-cutting measures aimed at aligning the company’s expenses with the lower revenues from its key markets in the mining sector.
In the second quarter of 2024, global platinum demand increased by 13% year-on-year, reaching 2,421 koz. This growth was fueled by a remarkable 137% surge in investment demand and a 5% rise in demand from the jewellery sector. Stable demand from the automotive and industrial sectors further contributed to the overall growth.
Demand is expected to continue its strong growth, particularly from the jewellery sector, which benefits from platinum’s price differential with gold. The automotive industry is also significantly driving demand as platinum increasingly substitutes palladium, particularly with the rise of heavy-duty vehicles and hybridization trends. Total platinum demand is forecast to reach 8,118 koz in 2024, resulting in a substantial market deficit of 1,028 koz.
On the supply side, while mine production increased and secondary supply stabilized, total global supply still fell short, reaching only 1,958 koz. This led to a significant deficit of 464 koz. For the full year, total platinum supply is projected to decline by 1% compared to the already weak levels of 2023.
In response to these supply constraints, platinum prices rebounded to around $920 per troy ounce in September, the highest in two months. Expectations of lower supply and declining global interest rates have increased the appeal of precious metals.
For companies like GB Holdings, which rely heavily on the mining sector for profitability, the outlook is positive. Bloomberg forecasts suggest that the average platinum price will rise to $957.33 per ounce in 2024, and further increase to $1,005.42 per ounce in 2025.