Antofagasta maintains full-year production guidance, lowers cost outlook
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The company said EBITDA of US$1.3 billion for the first half of 2019 was struck on 19.1% higher revenue yoy of $2.52 billion, achieved despite a 6.3% lower realised copper price with stronger copper sales volumes and by-product revenues. Operational cash flow of $1.51 billion was 70% higher than the same time last year.
Antofagasta's EBITDA margin of 51.7% was up from 42.6% last year as unit production costs decreased. The company says net cash cost guidance for the full year has been reduced by 5c/lb to $1.25/lb "assuming by-product prices and the Chilean peso exchange rate remain at similar levels to the first half of the year".
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Capital expenditure guidance for the full year is unchanged at $1.2 billion, with construction of the 60%-owned Los Pelambres expansion project in Chile 22% complete at the end of June and the rate of expenditure expected to accelerate in the second half of the year. Antofagasta's net debt fell by $78.9 million to $517.4 million in the first half.
"We have delivered robust financial results for the first half of the year reflecting higher production at all of our operations with EBITDA increasing by 44% to $1.3 billion," CEO Ivan Arriagada said.
"In line with our plan for the year, copper production during the half year period increased by 22% and we expect this rate of production to continue into the second half of 2019, which we expect to be another year of record copper production.
"With Antofagasta's strategy focused on producing profitable tonnes, the successful cost and competitiveness programme continues to deliver benefits and has yielded a cost saving of 7c/lb in the first half of the year helping us to reduce our net cash costs by 33c/lb to $1.19/lb.
"While the outlook for the copper market remains uncertain with the protracted negotiations between the USA and China impacting global trade, Antofagasta continues to be in a strong position generating solid cash flows and improving returns. We have the assets, capabilities and disciplined capital allocation strategy that allow us to deliver long-term value for all our stakeholders even in a challenging external macro environment."
In the UK, Bernstein said Los Pelambres looked to be on track for first production in 2021 with capex unchanged at $1.2 billion.
Antofagasta's 10.7c interim dividend, representing a pay-out ratio of 35%, was in line with the company's policy.
"The interim dividend … is 18% lower than we expected, which simply reflects the company meeting its minimum payout ratio, but up 48% on last year's," investment bank BMO said.
"Antofagasta remains the best positioned of the European copper pure plays and one of our top picks across our copper coverage. It does always screen as being relatively expensive versus peers, but this reflects the strong balance sheet, the quality of the assets and operational performance, and the consistently high shareholder returns over time. As well as good ongoing operations, the company is in growth mode, pushing forwards with the Los Pelambres phase I expansions with additional options to take copper production through 1Mt by 2024."