26th Feb 2019 08:59
LONDON (Alliance News) - Mexican gold and silver miner Fresnillo PLC on Tuesday said it expects 2019 to be "another challenging year" after reporting a sharp fall in profit in 2018, though revenue has improved slightly.
The stock was trading 7.4% lower on Tuesday at 904.00 pence a share, the worst blue-chip performer in London.
Fresnillo's revenue for 2017 rose 0.5% to USD2.10 billion from USD2.09 billion, coming in just short of the USD2.11 billion revenue forecast of Barclays analysts.
Pretax profit declined by 35% in 2018 to USD483.9 million from USD741.5 million, and earnings before interest, tax, depreciation, and amortisation fell by 14% to USD915.1 million from USD1.06 billion.
Fresnillo's 2018 gross profit dropped 16% to USD780.7 million from USD925.4 million a year earlier.
Cash generated from operations decreased by 13% to USD930.7 million, and capital expenditure rose 11% to USD668.7 million, though this was below guidance, mainly due to the delay in the start of the construction of the Juanicipio project.
Revenue was slightly higher due to the increased volumes of silver, lead and zinc sold, primarily from the San Julian mine in Mexico, offset by lower metal prices.
Fresnillo cut its final dividend to 16.70 US cents compared to 29.80 cents in 2017. This brings the total for 2018 to 27.40 cents, down 32% from the 40.40 cents the year before.
Production figures had already been released in mid-January, with silver production rising 5.3% to 61.8 million ounces from 58.7 million ounces, a record level. In 2018, the average realised silver price decreased by 8.3% to USD15.5 per ounce from USD16.9 per ounce in 2017.
Gold production also improved slightly, to 922,527 ounces from 911,132 ounces, with the average realised gold price broadly stable at USD1,269.1 per ounce versus USD1,267.4 a year earlier.
"Despite the year on year increase in silver production, we reported lower silver production than anticipated and were disappointed not to meet our long-term silver target of 65 million ounces," said Chief Executive Octavio Alvidrez.
"This was mainly due to lower-than-expected ore grades at the Fresnillo and Saucito mines combined with some operational issues," added Alvidrez.
Looking ahead, silver production is guided by Fresnillo at between 58 million to 61 million ounces, with gold production guided between 910,000 ounces to 930,000 ounces.
Alvidrez said: "I expect 2019 to be another challenging year. We face a number of headwinds, including lower prices for precious metals and higher inflation. I also expect to see higher depreciation costs as a result of the investments we have made in recent years into the operations, while we continue to expect to work through operational issues and lower grades at certain mines during the year."
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