On top of the record production in Q226, Sylvania’s PGM basket price increased by
21.6% to
US$2,374/oz from
US$1,953/oz in Q126, 5.8% ahead of our forecasts for the quarter. In addition, PGM prices rallied
sharply in the latter part of December 2025 and have now far surpassed our previous
PGM price forecast profile. The two most material PGMs for Sylvania’s revenue are
platinum (up over 50% since the start of December 2025) and rhodium (up almost 35%).
We have reviewed and upgraded our PGM price forecasts (see below).
Total revenue for the quarter increased by 21.5% to
US$54.8m (after a 49% rise in Q126), driven by 24.6% higher 4E PGM revenue and a large
US$5.3m sales adjustment, which relates to the late rally in PGM prices. Total operating
costs rose by 9% in rand terms, largely in line with PGM plant feed growth over the
period and allowing for higher royalties tax (with the effective royalties tax rate
bolstered by strong production and revenue). The growth in dollar terms was 12.3%
to
US$25m, affected by dollar weakness (on average the dollar was 2.9% weaker than the rand
and the 31 December 2025 spot price was 3.8% weaker). SDO cash cost per 4E PGM ounce
increased by 3.3% in rand terms and 6.4% in dollar terms. Since quarter-end, the dollar
has lost another 4.7% to the rand, which has resulted in higher cost growth forecasts
for FY26 and thereafter.
Capital expenditure moderated to
US$7.3m over the quarter and is still forecast to peak at
US$36m for FY26, after which the company expects it to reduce over the following years.
The cash balance reduced by 13.9% to
US$54.0m due to a
US$6.8m final dividend payment,
US$5.7m in tax and capital expenditure, including a further working capital loan of
US$5.7m to the JV partner. Together with healthy forecast operating cash generation and the
commencement of JV-related debt repayments, we expect the cash balance to start growing
healthily from FY27, supporting a progressive dividend policy and increasing the potential
for windfall dividends.
On the back of our higher forecast production for FY26, our upgrades to PGM prices
and the strong delivery during Q226, we now forecast revenue growth of 145% for the
year to
US$255.6m (up from
US$193.5m in our previous note). After allowing for higher operating costs and royalty taxes (in line with higher
revenue), our FY26 EPS has been lifted by 51.7% to 35.2 US cents.
After a ramp-up to full capacity by the end of FY26, we forecast a full-year of production
from the JV for FY27. This, together with our higher PGM price forecasts, drives a
further 52% forecast increase in revenue during the year, resulting in EPS growth
of 84% to 64.8 US cents (up 133% on our previous forecast). We thereafter forecast
modest 6.5% growth in EPS for FY28 to 69.0 US cents (up 143% on our previous forecast).
We forecast a healthy increase in the dividend from 2.75p/share in FY25 to 9p/share
in FY26 (increased from 7p/share) and 12p/share in FY27 (increased from 10p/share).
We forecast a further increase to 13p/share in FY28. While we do not explicitly forecast
windfall dividends, we expect these to resume (now in FY26 versus FY27 as mentioned
in our previous research) in the current conducive PGM environment.
PGM upgrade on strong rally an improved outlook
Following the strong rally since late-December 2025, we have upgraded our PGM price
forecasts, lifting our FY26 basket by 34% to
US$3,045/oz (and by 77% to
US$4,433/oz for FY27). The most meaningful upgrades are for platinum and palladium.
