3rd Mar 2020 08:36
(Alliance News) - Mexican gold miner Fresnillo PLC on Tuesday reported a steep drop in profit in what was a tough year for the firm.
The decline in profit has led to another significant cut to Fresnillo's annual dividend. Shares were 4.6% lower in early trade in London at 591.40 pence each.
Pretax profit in 2019 fell 63% to USD178.8 million, with earnings before interest, tax, depreciation, and amortisation declining by 26% to USD674.0 million.
Fresnillo, which was until last year a member of the FTSE 100 index before being demoted to the FTSE 250, posted revenue of USD2.12 billion, 0.8% higher than the year before.
As reported in January, Fresnillo's gold production in 2019 was 5.1% lower at 875,913 ounces. In December, it had set guidance at 885,000 ounces, from previous guidance of 880,000 ounces to 910,000 ounces.
The 2019 silver production figure was 54.6 million ounces, 12% lower year-on-year.
"During the year we experienced unexpectedly low ore grades and production, delays to infrastructure projects, shortfalls in contractor performance, higher costs and ineffective maintenance, among other issues," said Fresnillo.
"In the face of these challenges, our response has been to increase the pace and scale of investments in a series of projects and take corrective actions to bring production back to acceptable levels in the short term, and to achieve steady growth in future years."
Fresnillo is paying a 14.5 US cent total dividend for 2019, made up of a 2.6 cent interim payout and an 11.9 cent final return.
This is sharply lower than the 27.40 cents paid in 2018, which was itself 32% lower than the year prior.
The company has a target of paying 33% to 50% of post-tax profit each year as a dividend, which it has met once again.
"2019 was a more challenging year as expected, but we remain determined and optimistic for the future," said Chief Executive Octavio Alvidrez.
"Production did not meet our expectations in 2019. This challenging operating environment was reflected in our financial performance," he added.
Looking ahead to 2020, Fresnillo sees gold production between 815,000 ounces and 900,000 ounces, and silver production between 51 million to 56 million ounces. This guidance is unchanged from January.
"During the last six months of the year, we saw a gradual upturn in production, as the projects and initiatives I have outlined began to feed through into results. I expect this trend to continue, with the year ahead being characterised by greater stability. However, significant improvements will not be seen until 2021," commented Non-Executive Chair Antonio Bailleres.
By George Collard; [email protected]
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