Lonmin slumps as strike action thrashes profits

 
Suzie Neuwirth
THE WORLD’S third-largest platinum producer Lonmin saw its share price tumble yesterday, after it revealed a steep decline in half-year profit due to ongoing strike action by its workers in South Africa.

The FTSE 100 firm said job cuts and restructuring were inevitable, as underlying operating profit fell to $34m (£20.2m) from $93m a year ago.

Lonmin was expecting a mass return to work on Wednesday after the 16-week strike, but two of its employees were killed as they reported for work yesterday, putting its plans to resume production in jeopardy.

The militant Association of Mineworkers and Construction Union (Amcu) controls the majority of workers at South Africa’s three largest mines. Their order to strike has cut 40 per cent of global platinum production and halted Lonmin’s operations.

“National Union of Mineworkers (NUM) members who went to work are being intimidated and assaulted,” the rival union told Reuters.

Lonmin said it produced 215,117 ounces of platinum, down 41 per cent from a year earlier and sold 263,675 ounces, down 19 per cent.

“It is inevitable in that scenario that the business will have to be restructured with consequences on job losses,” said chief executive Ben Magara.

“The depth of the restructuring will depend clearly on the return to work date and how we will ramp up production.” Magara defended the firm’s wage offer of three per cent above the South African inflation rate, calling it “one of the best in the industry”.

Shares fell four per cent to 271.20p.