7th Mar 2023 15:36
(Alliance News) - Peel Hunt was pleased with Fresnillo PLC's dividend on Tuesday, despite it halving year-on-year.
Fresnillo on Tuesday said results for 2022 were hit by industry pressures, including volatile precious metal prices and rising cost inflation.
The Mexican miner said silver production edged up 1.2% to 53.7 million ounces from 53.1 million a year ago, but gold production fell 15% to 635,926 ounces from 751,203. Both were in line with company guidance, however.
Total revenue fell 10% to USD2.43 billion from USD2.70 billion due to the lower adjusted revenue combined with "higher treatment and refining charges", it said.
Pretax profit slumped 59% to USD248.6 million from USD611.5 million. Earnings before interest, tax, depreciation and amortisation amounted to USD751.1 million, down 38% from USD1.21 billion a year ago.
Adjusted production costs rose 15% to USD1.45 billion from USD1.26 billion.
UBS had predicted pretax profit to drop to USD192 million, and revenue to fall to USD2.52 billion.
Peel Hunt Analyst Peter Mallin-Jones said that despite revenue falling year-on-year, the result came in better than its expectations of USD2.3 billion. However, due to higher cash costs, the company missed Peel Hunt's Ebitda target of USD84 million.
The lower Ebitda translated into "significantly lower" operating cash flow, Mallin-Jones explained. Operating cash flow came in at USD475 million, which is significantly lower compared to Peel Hunt's USD636 million estimate.
Chief Executive Officer Octavio Alvidrez said: "Fresnillo delivered a resilient operating performance in 2022, with our people rising to meet a number of external challenges and deliver on our production guidance. Our financial results were impacted by industry pressures included volatile precious metal prices and higher cost inflation, while our workforce continued to feel the impact of the pandemic and caused delays to our development programme, and more specific to Mexico, the labour reform which limited the use of contractors requiring us to train new employees."
Fresnillo declared a final dividend of 13.3 US cents per share, bringing the annual total to 16.7 US cents, down 51% from 33.9 US cents a year prior.
Mallin-Jones said this was "significantly better" than Peel Hunt's expected total dividend of 13.4 US cents. He added that this comes "despite the lower-than expected cash flows."
In 2023, Fresnillo expects attributable silver production expected to be in the range of 57.0 million to 64.0 million ounces, including silverstream, so up by 6.1% to 19%.
Gold production is expected at 590,000 to 640,000 ounces, so down by 7.2% to up marginally.
Fresnillo said it expects cost inflation to persist in the year ahead.
Peel Hunt also issued its own guidance. It said its silver production estimate is in the middle of Fresnillo's guidance range, and its gold production estimate is at the bottom. Peel Hunt added that it expects cash costs to be higher than expected.
Shares were down 5.4% at 719.63 pence each on Tuesday afternoon in London.
Peel Hunt rates Fresnillo at 'hold', with a target price of 800.00p.
By Sophie Rose, Alliance News reporter
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