* Platinum output up 5.5 pct but seen down in FY12
* Headline earnings up 41 pct to R11.05 per share
* CEO says Zimbabwe ownership policy cannot work (Writes through with CEO, analyst comments, details)
By Ed Stoddard
JOHANNESBURG, Aug 25 (Reuters) - South Africa's Impala Platinum Holdings (Implats), the world's second largest platinum producer, said on Thursday that its headline earnings for the 2011 financial year rose 41 percent as it reaped the benefit of rising prices.
Implats' headline earnings per share for the financial year that ended June 30 soared from 786 cents to 1,105 cents, near the top end of the 1,075 to 1,115-cent range the group had flagged in advance to the market.
Higher prices, which started the financial year around $1,500 ended near $1,800 an ounce, and a 5.5 percent rise in platinum output to just over 1.83 million ounces, were the main drivers behind the increased earnings.
Implats also said it was on course to reach platinum output of 2 million ounces by 2014 as new shafts ramp up but before then production would be restrained by aging infrastructure and was seen falling 7.5 percent to 1.7 million ounces over the 2012 financial year.
Analysts said the group had some things in its favour as over the long term platinum demand looked set to remain robust. It is the key metal needed for catalytic converters used to control exhaust emissions for cars and Implats accounts for close to 30 percent of global platinum supply.
"The underlying trends are quite good ... anything that emits noxious fumes will have to be regulated some day," said Sasha Naryshkine, an analyst at Vestact in Johannesburg.
But the group faces challenges including rising power costs, safety concerns, bad labour relations and uncertainty about its Zimbabwe unit Zimplats as the government there tries to force foreign miners to transfer 51 percent of their local stakes to black investors in the country.
The possibility of a strike in its South African operations looms and that could impact output this year while the outcome may herald another round of steep wage hikes.
"Costs and safety and Zimbabwe are major concern. Who likes uncertainty? We've been sellers of the stock and been tossing them out of core portfolios," said Naryshkine.
Implats' share price is down about 27 percent in the year to date, according to Thomson Reuters data, while the spot platinum price is up about 2.6 percent.
Implats has a lot riding on its Zimbabwe operations as they account for close to 10 percent of group production and expansion there is a key part of its strategy to reach 2 million ounces by 2014.
ZIMBABWE POLICY "DOES NOT WORK"
In unusually blunt language on the issue, Implats chief executive David Brown said Zimbabwe's ownership drive was an unworkable policy that would damage the country.
"We believe that 51 percent equity just does not work," Brown said on a conference call with journalists.
"What they are doing is very bad for the country ... and has the potential to retard investment," he said. He also said the company wanted to see the law changed.
In the most recent twist to the saga, Zimbabwe's Empowerment Minister Saviour Kasukuwere wrote to the company on Aug. 17 rejecting its proposals on the issue and directing it to offer a revised plan within 14 days.
Zimbabwe has the world's second-largest known platinum reserves after neighbouring South Africa and market watchers and investors are therefore keen to see how the drama unfolds against the backdrop of strong commodity prices.
Looking ahead on other fronts, Brown said he saw platinum's spot price ranging between $1,750 and $1,950 and ounce over the next six to nine months.
He said increasing power rates remained a concern after the company saw unit costs rise eight percent in the last financial year to 10,867 rand ($1,502) per refined platinum ounce.
Revenue for the period under review rose 30 percent to 33.1 billion rand. The dividend for the full year rose 46 percent to 570 cents per share. ($1=7.233 South African Rand) (Reporting by Ed Stoddard; Editing by David Cowell)