Shares in Kaz jumped 14% as market priced in big EBITDA margin increase and bumper profits
Companies: KAZ Minerals PLC
Shares in Kaz Minerals were up 14% in early trading as the company released strong half-year financials with EBITDA of £115m (+30% Yoy), and pre-tax profit of £91m (up from £2m H115), despite revenues falling 11%.
The bumper results were due to a ramping up of production and a huge increase in EBITDA margin from 25% to 38%, primarily due to the collapse of the Kazakh currency, the Tenge, which had a significant and beneficial impact on costs.
The company generated $115 million of EBITDA in the first half, or $147 million of Gross EBITDA, an increase of $53 million (+56% H115). Lower commodity prices were offset by production growth at Bozymchak, Bozshakol and Aktogay oxide, and lower operating costs in US dollar terms following the huge devaluation of the tenge.
Operating profit was up from $15m H115 to $68 million H116. The reported PBT was $91 million and underlying profit was $76 million, benefitting from $32 million of net forex gains.Tenge Currency Chart
The Group produced 52.6 kt of copper cathode equivalent in the H116, an increase of 43% compared to H116. The East Region and Bozymchak contributed 39.4 kt, with Bozshakol contributing 7.8 kt and Aktogay contributing 5.4 kt.
Following a strong first-half, the company said the East Region and Bozymchak mines are now expected to produce around 75 kt of copper cathode equivalent in 2016. Copper cathode equivalent production includes the finished metal equivalent of copper in concentrate sold in the period.
Bozshakol completed 18 shipments of copper concentrate to smelting customers in China in the first half. KAZ shares were up nearly 14% this morning on the announcement, before plateauing at 11%.
Broker ViewVSA Capital said:
"Despite weaker grades in the Eastern region down from 2.38% to 2.27% Cu and higher ramp up costs at the new mines, the depreciation of the Tenge, which averaged 86% lower through H1 2016, has had a significant and beneficial impact on costs. Indeed, EBITDA in H1 2016 was up 31% YoY to US$115m and cash cost guidance has been lowered for 2016.
Production guidance has been narrowed to 135-145kt from 130-155kt with the ramp up at Bozshakol set to continue which is crucial to achieving the full year target. Whilst KAZ’s operational performance is currently strong, the earnings outlook likely hinges on the Tenge’s performance, in our view and the stock remains high risk exposure to copper."
Oleg Novachuk, Chief Executive, said:
"We have continued to deliver on our strategy of high growth, low-cost copper in the first half of 2016 with production increasing by 43%, including the first significant contributions from Bozshakol and Aktogay. We have also been able to further reduce our operating costs with 34% lower gross cash costs in the East Region and Bozymchak supporting an improved EBITDA despite weaker commodity prices. Our growth is set to accelerate as Bozshakol continues its ramp up in the second half of the year followed by the commissioning of Aktogay sulphide in the first half of 2017."
