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01/11 03:33
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Net Revenues $708 million, up 13% compared to the first quarter of 2025, but down 4% year-over-year. The increase was driven by higher smelter sales volume and stronger byproduct contribution, while the year-over-year decline was due to lower zinc, copper, and lead prices as well as lower smelting sales volume.
Adjusted EBITDA $161 million, a 28% sequential increase but a 22% year-over-year decline. The sequential increase was due to higher smelter sales volumes and increased byproduct contribution, while the year-over-year decline was attributed to higher operational costs and lower smelting sales volume.
Free Cash Flow $17 million, an improvement over the previous quarter, supported by better working capital management.
Zinc Production 74,000 tonnes, up 9% quarter-over-quarter but down 14% year-over-year. The quarter-over-quarter increase was due to higher treated ore volumes and better grades at Peruvian operations, while the year-over-year decline was due to lower output at Vazante and Aripuana.
Smelting Segment Zinc Sales 145,000 tonnes, a 12% increase quarter-over-quarter but a 2% year-over-year decline. The quarter-over-quarter increase was driven by higher production at Cajamarquilla and Juiz de Fora, while the year-over-year decline was due to lower sales volumes.
Consolidated Mining Cash Cost Net of Byproducts Minus $0.11 per pound in Q2 2025, a significant improvement from $0.11 per pound in Q1 2025 and $0.02 per pound in Q2 2024. The improvement was driven by higher byproduct contribution and increased sales volume.
Cost Per Run of Mine $50 per tonne, up 4% year-over-year and quarter-over-quarter. The increase was mainly due to higher costs associated with stabilization efforts at Aripuana.
Smelting Conversion Cost $0.39 per pound, up 19% quarter-over-quarter and 30% year-over-year. The increase was due to higher maintenance expenses, third-party services, and input costs.
Cash Cost in Smelting Segment $1.23 per pound in Q2 2025, compared to $1.17 per pound in Q1 2025 and $1.19 per pound in Q2 2024. The increase was due to higher operational costs and lower treatment charges, partially offset by lower LME zinc prices.
CapEx $137 million in the first half of 2025, with $87 million invested in Q2 2025. The majority was allocated to sustaining activities, including mine development, maintenance, and tailings storage facilities.
Net Debt to Adjusted EBITDA Ratio 2.3x at the end of Q2 2025, up from 2.1x at the end of Q1 2025. The increase was due to a decline in adjusted EBITDA over the last 12 months and a slight increase in net debt.
Aripuana Fourth Tailings Filter: Installation progressing on schedule, expected to unlock full production capacity and improve efficiency and cash flow. Commissioning expected in H1 2026.
Cerro Pasco Integration Project: Phase 1 progressing well with milestones achieved, including engineering, permitting, and contractor mobilization. Preparatory work for Phase 2 ongoing.
Zinc Market: Prices declined 7% year-over-year and quarter-over-quarter, but medium- to long-term outlook remains positive due to its role in energy transition and infrastructure development.
Copper Market: Prices increased 2% quarter-over-quarter, supported by declining inventories and strong fundamentals.
Zinc Production: Increased 9% quarter-over-quarter to 74,000 tonnes, driven by higher treated ore volumes and better grades in Peruvian operations.
Smelting Segment: Total zinc sales reached 145,000 tonnes, up 12% quarter-over-quarter, driven by higher production and stronger zinc oxide sales.
Cost Management: Consolidated mining cash cost net of byproducts improved to -$0.11 per pound in Q2 2025, reflecting higher byproduct contributions and increased sales volume.
Liability Management: Successfully extended debt maturities to 7.7 years with a $500 million bond issuance, improving financial flexibility and reducing refinancing risk.
Exploration Program: Positive results in Cerro Lindo, Aripuana, Vazante, and Cerro Pasco, reinforcing long-term potential and supporting life of mine extensions.
Operational Challenges at Aripuana and Vazante: Both mines faced disruptions in the first quarter of 2025, including limited access to higher-grade zones at Vazante and tailings filter capacity issues at Aripuana due to excessive rainfall and maintenance challenges. These issues impacted production and cost guidance.
Tailings Filter Capacity at Aripuana: The plant faced increased downtime due to corrective stoppages caused by heavy rainfall, limiting production capacity. The fourth tailings filter is under procurement but will not be operational until 2026, prolonging operational constraints.
Smelting Segment Cost Increases: Smelting conversion costs rose by 19% quarter-over-quarter and 30% year-over-year due to higher maintenance expenses, third-party services, and input costs, impacting profitability.
Market Volatility in Metal Prices: Zinc and lead prices declined, while copper and silver prices showed mixed trends. This volatility affects revenue and profitability, particularly for zinc, which saw a 7% price decline year-over-year.
Debt and Leverage Concerns: Net debt to adjusted EBITDA ratio increased from 2.1x to 2.3x due to higher operational costs and lower adjusted EBITDA. Although liquidity remains strong, the slight increase in leverage poses a risk to financial flexibility.
Regulatory and Trade Risks: Recent U.S. tariffs on metals may affect global trade flows, although NEXA's direct exposure is limited. This adds uncertainty to market conditions.
Cost Pressures in Mining Operations: Run-of-mine costs increased by 4% year-over-year, mainly due to stabilization efforts at Aripuana. These higher costs could pressure margins if not mitigated.
Delayed Project Timelines: The Cerro Pasco integration project and the fourth tailings filter at Aripuana are progressing but face long timelines, delaying the realization of full operational and financial benefits.
Full Year Production and Cost Guidance: The company is revising its full-year production and cost guidance to reflect operational challenges in the first quarter at Aripuana and Vazante, which also impacted smelters in Brazil.
Aripuana Fourth Tailings Filter: The acquisition and installation of the fourth tailings filter at Aripuana is on track, with commissioning expected in the first half of 2026. This will unlock full production capacity and support long-term operational stability.
Cerro Pasco Integration Project: Phase 1 of the Cerro Pasco integration project is progressing well, with key milestones achieved, including final engineering, permitting, and contractor mobilization. Preparatory work for Phase 2 is also advancing.
Aripuana Plant Performance: The plant is expected to deliver higher adjusted EBITDA in the second half of 2025, supported by higher production, ongoing cost reduction initiatives, and margin improvements. Monthly feed rates are projected to surpass 130,000 tonnes.
Exploration Program: The exploration program continues to deliver positive results, with ongoing confirmation of new mineralized zones at Aripuana, Cerro Lindo, Vazante, and Cerro Pasco, reinforcing the potential for life-of-mine extensions.
2025 CapEx Guidance: The company reaffirms its 2025 CapEx guidance at $347 million, with major disbursements expected in the second half of the year.
2025 Exploration and Project Evaluation Guidance: The company reaffirms its 2025 guidance for exploration and project evaluation at $88 million, with an acceleration in disbursements expected in the coming quarters.
Zinc Market Outlook: The company remains positive on the medium- to long-term outlook for zinc, supported by its critical role in energy transition and infrastructure development.
Copper and Silver Market Outlook: Copper market fundamentals are expected to remain supportive, while silver prices are anticipated to benefit from a structural supply gap driven by mine supply constraints and low inventories.
Dividend Payment: NEXA paid $26 million in dividends during the second quarter of 2025. Of this amount, approximately $30 million was distributed to NEXA shareholders through share premium reimbursement, and another $30 million was paid as contractual dividends to noncontrolling interests.
Share Repurchase: No share repurchase program was mentioned or discussed in the transcript.
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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