30th Jul 2019 08:15
(Alliance News) - Lower production and gold prices have led to a decline in revenue and a far steeper fall in profit, Mexican miner Fresnillo PLC reported on Tuesday.
Fresnillo's revenue for the six months to June declined 10% to USD1.00 billion, with pretax profit from continuing operations dropping dramatically to USD54.1 million from USD323.0 million a year before. Adjusted earnings before interest, tax, depreciation, and amortisation fell 46% to USD307.9 million.
The worsened results were due to a 7.1% fall in gold production to 432,417 ounces in the half-year, and a 10% dip in silver output to 27.6 million ounces, which had been reported earlier in July.
Fresnillo cut guidance at the same time as it had reported interim production, now seeing 2019 gold output at between 880,000 ounces and 910,000 ounces from 910,000 ounces to 930,000 ounces before. Silver production guidance was lowered to 55 million to 58 million ounces from 58 million ounces to 61 million ounces previously.
In response, Fresnillo slashed its interim dividend by 76%, to USD0.026 per share from USD0.107 a year before.
"As we previously disclosed in our second quarter production report, continued challenges at our Fresnillo, Saucito and Herradura mines, combined with higher costs, have impacted profitability for the period," said Chief Executive Octavio Alvidrez.
"Following the measures put in place, we have seen some short term improvement in mine performance at both Fresnillo and Saucito and we expect to see a gradual improvement in the following quarters, albeit not at the rate we had anticipated. We therefore adjusted our full year production forecasts in the second quarter production report.
"Performance of the business in the first half has not met our expectations. I am, however, encouraged the steps we are taking, the targeted, albeit downsized compared to last year exploration programme and the progress on nearer term growth projects, give us greater confidence in the medium term outlook," the CEO added.
Fresnillo recognises 2019 has been, and will continue to be, a difficult year, it said, but it is confident on turning things around.
Shares were down 4.0% on Tuesday in early trade in London at 763.20 pence each.
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