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01/11 03:35
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture with negative leanings. While revenue grew by 8% and zinc prices increased, production challenges, lower smelting sales, and increased debt leverage are concerning. The Q&A reveals operational disruptions and unclear future profitability impacts due to TCs. Despite optimistic recovery expectations, the negative working capital and increased debt leverage weigh heavily. The new bond issuance and repurchase plans do not sufficiently offset these negatives. Given the small market cap, these issues may lead to a negative stock reaction in the short term.
Consolidated Net Revenues $627 million, 8% increase year-over-year, driven by higher metal prices, partially offset by lower smelting sales volumes.
Adjusted EBITDA $125 million, 3% decrease year-over-year, primarily due to lower smelting sales volumes, partially offset by higher zinc prices and increased byproduct contribution.
Adjusted EBITDA Margin 20%, 2 percentage points lower year-over-year, reflecting the impact of lower sales volumes and higher costs.
Mining Cash Cost $0.11 per pound, down from $0.26 per pound year-over-year, driven by higher byproduct contributions and lower treatment charges.
Cost per Run of Mine $48 per ton, up 7% year-over-year, mainly due to lower treated ore volumes.
Smelting Cash Cost $1.17 per pound, up from $0.98 per pound year-over-year, mainly due to higher raw material costs and lower treatment charges.
Conversion Cost $0.33 per pound, slightly up from $0.30 per pound year-over-year, due to higher variable costs and maintenance expenses.
Operating Cash Flow $158 million, generated before working capital variations.
Free Cash Flow Negative $226 million, impacted by a typical seasonal working capital intensity.
Available Liquidity Approximately $721 million, including a $320 million undrawn revolving credit facility.
Net Debt-to-Adjusted EBITDA Ratio 2.1x, increased from 1.7x at the end of 2024, primarily due to a seasonal decrease in cash balance.
CapEx $50 million, primarily directed toward sustaining activities and the Cerro Pasco Integration project.
Zinc Production 67,000 tons, down 23% year-over-year, impacted by operational challenges and heavy rainfall.
Total Sales in Smelting Segment 130,000 tons, decreased by 6% year-over-year, primarily driven by lower production at Tres Marias and Juiz de Fora.
LME Zinc Price $2,838 per ton, reflecting a 16% increase year-over-year.
LME Copper Price $9,340 per ton, up 11% year-over-year.
LME Silver Price $32 per ounce, up 37% year-over-year.
New Product Acquisition: Acquisition of the fourth tailing filter has been completed and is currently under construction, expected to enhance operational capacity.
Cerro Pasco Integration Project: Phase 1 of the Cerro Pasco Integration project is progressing well, focusing on tailings pumping and piping system.
Zinc Market Fundamentals: LME zinc price averaged $2,838 per ton, reflecting a 16% increase year-over-year, with expectations of lower refined metal production ahead.
Copper Market Fundamentals: LME copper price averaged $9,340 per ton, up 11% year-over-year, with strong fundamentals supporting prices.
Operational Efficiency: Mining cash cost significantly dropped to $0.11 per pound compared to $0.26 per pound in the same period last year.
Production Challenges: Production volumes slightly below estimates due to heavy rainfall impacting several sites.
Strategic Focus: Focus on improving margins through disciplined operational performance and cost control.
Exploration Strategy: Exploration efforts aimed at extending the life of assets, particularly at Aripuanã and Cerro Lindo.
Global Economic Slowdown: Concerns over a potential global economic slowdown impacting demand and pricing for metals.
Geopolitical Tensions: Ongoing geopolitical tensions contributing to market volatility and uncertainty.
Inflation and Supply Chain Disruptions: Inflationary pressures and supply chain disruptions affecting operational costs and efficiency.
Operational Challenges: Heavy rainfall in the Pasco region leading to production challenges at El Porvenir, Atacocha, and Aripuanã.
Lower Production Volumes: Production volumes slightly below estimates due to operational challenges and weather conditions.
Zinc Treatment Charges (TCs): Historically low zinc treatment charges impacting smelting margins.
Cash Flow Variability: Negative working capital impact of $265 million due to seasonal payment cycles, affecting cash flow.
Debt Maturity Profile: Increased net debt-to-adjusted EBITDA ratio from 1.7x to 2.1x, indicating higher leverage.
Market Volatility: Metal prices expected to remain volatile amid ongoing trade tensions and macroeconomic uncertainty.
Lower Smelting Sales Volumes: Decline in smelting sales volumes contributing to reduced revenues and EBITDA.
Cerro Pasco Integration Project: The Cerro Pasco Integration project is progressing as planned, with construction of the tailings pumping system expected to begin in the second quarter of 2025. This project aims to extend operations for over 10 years, adding substantial value.
Aripuanã Production Improvement: Efforts are underway to increase production at Aripuanã, improve filter performance, and enhance flexibility while maintaining cost efficiency to support better margins and stronger cash flow.
Exploration Strategy: Exploration remains a key pillar of Nexa's long-term strategy, focusing on extending the life of assets through geological studies in Aripuanã, the integration zone in Pasco, and Cerro Lindo.
ESG Commitments: Nexa continues to track progress towards public commitments and has published its 2024 annual report detailing performance and progress on strategic fronts.
Financial Discipline: Nexa is executing a liability management strategy aimed at improving financial flexibility, prioritizing cash generation and smart capital allocation.
2025 CapEx Guidance: Nexa's 2025 CapEx guidance remains unchanged at $347 million, with disbursements expected to accelerate in the upcoming quarters.
Adjusted EBITDA Expectations: Nexa expects to deliver higher adjusted EBITDA and operating cash flow in 2025, supported by ongoing efforts to reduce costs and improve margins.
Zinc Production Guidance: The company anticipates a year-over-year reduction of approximately 15,000 tons in zinc production due to a volatile market environment and lower treatment charges.
Exploration and Project Evaluation Guidance: Nexa reaffirms its 2025 guidance for exploration and project evaluation at $88 million.
Debt Management: Nexa successfully extended its debt maturity profile from 5.3 years to approximately eight years, enhancing financial flexibility and reducing near-term refinancing risk.
Shareholder Return Plan: Nexa Resources announced a new bond issuance of $500 million with a 12-year maturity and a 6.6% coupon rate. This issuance allowed the company to repurchase approximately $105 million and $289 million of existing notes due in 2027 and 2028, respectively. Additionally, plans were disclosed to fully redeem the remaining 2027 notes of approximately $110 million via a make-whole call option.
The earnings call presents a mixed outlook. While operational improvements and a positive liquidity position are noted, challenges such as high workforce turnover, unclear guidance on CapEx adjustments, and operational challenges at Aripuana persist. The Q&A reveals some management vagueness, particularly concerning CapEx flexibility and workforce turnover. Despite positive long-term market outlooks and improved leverage, these uncertainties and operational issues balance out the positive elements, leading to a neutral sentiment.
The earnings call summary shows mixed results: strong free cash flow and improved cash costs are positive, but increased costs and lower YoY zinc production are concerning. The Q&A reveals uncertainties, particularly around guidance downgrades and management's unclear responses. Despite the company's strategic initiatives and financial discipline, these mixed signals and market cap suggest a neutral stock price movement.
The earnings call highlights several negative factors: operational challenges due to heavy rainfall, increased net debt-to-EBITDA ratio, and a decline in zinc production. The Q&A session reveals concerns about geotechnical issues and vague responses on TCRCs. Despite positive cash flow and debt management, these issues, combined with unchanged revenue and decreased EBITDA margin, suggest a negative sentiment. Given the company's small market cap, the stock is likely to react negatively, potentially falling between 2% to 8%.
The earnings call presents a mixed picture with negative leanings. While revenue grew by 8% and zinc prices increased, production challenges, lower smelting sales, and increased debt leverage are concerning. The Q&A reveals operational disruptions and unclear future profitability impacts due to TCs. Despite optimistic recovery expectations, the negative working capital and increased debt leverage weigh heavily. The new bond issuance and repurchase plans do not sufficiently offset these negatives. Given the small market cap, these issues may lead to a negative stock reaction in the short term.
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