1st Mar 2016 07:55
LONDON (Alliance News) - Fresnillo PLC Tuesday said its profit dropped in 2015 as lower gold prices placed its margin under pressure and offset a small rise in revenue, as the miner cut its capital expenditure budgets further in response to the current environment.
The gold miner said its pretax profit from continuing operations dropped to USD212.4 million in 2015 from USD251.1 million a year earlier as its margin was squeezed in the year thanks to lower gold prices, offsetting a small rise in revenue.
Fresnillo's revenue in 2015 amounted to USD1.44 billion compared to USD1.41 billion in 2014, a touch under analyst expectations.
However, Fresnillo saw its margin fall considerably in the year as it reported a gross profit of only USD433.1 million in 2015 compared to USD521.1 million in 2014, representing a 17% fall.
"We maintained a strong financial position, ending the year with a healthy cash balance, and without impairments. Weaker precious metals prices clearly impacted financial performance, but this was offset by higher volumes; we continued to generate sound profit margins and substantial cashflow from operating activities," said Chief Executive Octavio Alvidrez.
Earnings before interest, tax, depreciation and amortisation was down 3.5% year-on-year to USD547.5 million from USD567.3 million, but was below analyst expectations.
Fresnillo will pay a final dividend of 3.35 cents in 2015, building on the interim dividend of 2.1 cents to create a total dividend for 2015 of 5.45 cents. That is considerably less than the 14.80 cents paid last year, but that included 11.8 cents of special dividends.
Gold production in 2015 totalled 762,000 ounces, comfortably beating the company's revised guidance range of 715,000 to 730,000 ounces, whilst silver production also came in at the top end of the company's guidance range at 47.0 million ounces, increasing 4.4% from 2014.
Although Fresnillo expects a significant increase in production of both gold and silver this year, the guidance is lower than its previous estimates, as outlined late last year.
Silver production in 2016 will be between 49.0 to 51.0 million ounces whilst gold production will be in the range of 775,000 to 790,000 ounces of gold.
"In addition, we will continue to pursue a favourable resolution on Soledad-Dipolos, where mining and beneficiation were suspended in 2013 following contested ownership of some surface lands; since that time, we have fostered strong relationships with other neighbouring agrarian communities that have led to the signing of new agreements," said the miner.
Capital expenditure in 2016 will amount to around USD600.0 million whilst it plans to spend between USD135.0 to USD140.0 million on exploration. That compares to the capital expenditure budget of USD474.0 million in 2015 and exploration spend of USD140.0 million.
Net debt at the end of the year stood at USD296.9 million, with a cash balance of USD500.1 million.
"In light of the weak precious metals price backdrop, we reduced 2015 capital expenditure and exploration spend from budgeted levels, and have similarly reduced these budgets for 2016, deferring certain investments whilst favouring those which accelerate cashflow generation as part of our contingency plan. We will continue to focus on further cost reductions, productivity improvements and value preservation measures as we work towards our 2016 production targets," said Alvidrez.
By Joshua Warner; [email protected]; @JoshAlliance
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