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Updating estimates following a generally weak quarter Following 2Q25 results, we cut our EBIT excluding PIR forecast by -8% to SEK 8.5bn for 2025, leaving our estimate -9% below Bloomberg consensus. The downgrade is primarily driven by the mining division, reflecting the lower grade guidance on Garpenberg and higher depreciation from Somincor and Zinkgruvan. Conversely, we upgrade forecasts for the smelting division to reflect the stronger operating performance. Earnings forecasts for 2026 and 2027 are largely unchanged, aside from the increased run rate of depreciation. We upgrade our FCF forecast for 2025 to reflect the stronger working capital release in 2Q25, while our FCF forecast for 2026 and 2027 remained largely unchanged. Reiterate Underperform with SEK 250 TP. Detailed estimate revisions are provided in the table overleaf. 2Q25 results recap Boliden''s 2Q25 EBIT excluding PIR missed consensus by -9%. While Smelters came +65% ahead of consensus, Mines and the elimination line weighed on results. FCF during the quarter was well ahead of consensus, driven by a SEK 3.5bn WC release. Mine grade and tonnage guidance for 2025 is largely unchanged aside from Garpenberg where zinc grade guidance was modestly downgraded to 3.1% vs 3.3%. For a more in-depth summary of the quarterly results, please see note here. Challenging outlook Boliden looks set for a difficult 2025 with copper and zinc TC annual contract settled at a historic low. The weaker dollar against the SEK had a negative impact of SEK 600m to earnings in 2Q25 and we expect the FX headwind to continue in the second half. Grade guidance also points to another year of relying on throughput to support volumes. The low grades continue to expose Boliden to production volatility from relatively minor deviations vs. mine plans. With negative FCF forecast for 2025 amid elevated leverage, there is limited scope to pay additional returns beyond the ordinary dividend.
Boliden Ab Boliden AB
What happened? Boliden''s 2Q25 EBIT excluding PIR missed consensus by -9%. FCF was ahead of expectations and flattered by a large WC release. A call will be held this morning at 8:30am UK time (link to webcast here) BNPP Exane View: Boliden reported 2Q25 EBIT excluding PIR of SEK 1.3bn, -9% vs a consensus that has been declining over the last month. While Smelters came in a SEK 0.6bn (+65% vs consensus), Mines (1.0bn, -11% vs consensus) and Other (-SEK 338m vs consensus -SEK 112m) weighed on results. In Mines, zinc in concentrate sold was +10% above production levels, reversing the same nominal delta in 1Q25 where it sold less than it produced. The weaker dollar against the SEK was estimated to be a SEK 600m headwind to earnings on both a y/y and q/q basis. FCF during the quarter was positive SEK 2.0bn (-SEK 12.4bn if including acquisition costs of new mines), well ahead of Bloomberg consensus of negative SEK 5.3bn though we don''t have the visibility whether the acquisition costs were included in some of those estimates. Compared to our FCF, we had forecast - SEK 0.5bn, with the beat primarily due to a SEK 3.5bn WC release. Net debt of SEK 20.5bn was naturally below expectations given the FCF beat. At the Aitik mine, production (waste + ore) reached a new record. Hard to grind ore containing diorite continues but was less of an impact to what it was in 1Q25. With more mining close to surface, ore was oxidised which negatively impacted recoveries. Grade and tonnage guidance for 2025 the mines is largely unch aside from Garpenberg where zinc grade guidance was modestly downgraded to 3.1% vs 3.3%. Whereas typically Boliden releases the year ahead guidance with Q3 results, it will aim to provide a harmonised guidance for all mines (including the new acquisitions) and smelters and capex in early December.
A weak quarter expected on 18 July We forecast 2Q25 EBIT, excluding PIR (Boliden''s headline number), to contract -39% q/q to SEK1.6bn (figure 1), in-line with Bloomberg consensus. We expect weakness across Mining and Smelting as the latter transitions to be 100% on the 2025 annual copper TCRC contract (vs 50% in 1Q25), an expected SEK300m headwind. While the quarter should show an alleviation of the strikes seen in 1Q25 and the first full quarter of contribution from the recently acquired assets, this will be more than offset by the aforementioned TCRC contract, planned maintenance, advisor payments and metal prices/Fx. Copper smelting outlook remains challenged Antofagasta (-) reportedly concluded 2H25 copper TCRC negotiations at USD0/t with Chinese smelters. While better than the opening offer of negative USD15/t, it represents another meaningful step-down vs the 2025 contract of USD21.25/t and is setting the stage for a difficult 2026 negotiation (usually concluded around mid-November). While Boliden is not particularly exposed to the spot market, it is clearly exposed to contract negotiations for future years and if gold doesn''t hold to these levels USD3,330/oz which have lifted free metal credits, it could be a very difficult phase before smelters curtail production balances the market. Lowering estimates in Mining, mostly unchanged in Smelting At the group level, we cut our 2025 EBITDA and EBIT, excluding PIR by -5% and -1% respectively (figure 2). This is predominantly driven by the Mining division where we mark-to-market for 2Q25 and get more conservative on cost performance in the coming quarters. Our 2026 and 2027 forecasts are largely unchanged (-1% on average). Despite the earnings downgrade in 2025, we keep our SEK250 TP unchanged as some updates to underlying assumptions for WACC offset the earnings decrease. We reiterate our Underperform rating.
Company catch-up We have spoken to IR of Boliden which is due to report 2Q25 results on 18 July and note there is no change to the outlook. Key points include: . Barring any late developments in the quarter, there are no strikes in 2Q25 which were a SEK 100m headwind in 1Q25. . 2Q25 will be the first quarter (10 of the 12 weeks) with contributions from the new mines purchased from Lundin Mining (NC). However, Swedish accounting standards require depreciation to be based on the reserve life (9 years) . Planned maintenance in Smelters in 2Q25 is going to plan and will be a headwind of SEK 400m q/q (vs nil in 1Q25), as detailed in the 1Q25 release. . Costs related to the closing of the Somincor/Zinkgruvan acquisition of SEK 150m, also highlighted in the 1Q25 release, will be recorded in the Mine segment in 2Q25. . In a 23 April 2025 interview with Dagens Industri, CEO Mikael Staffas noted that if 1Q25 had spot metal prices and Fx, the 1Q25 results would have been SEK 800m lower. . Smelters will move fully to the 2025 annual TCRC copper contract (vs 50% in 1Q25) which the CFO estimated to be a SEK 300m headwind on the 1Q25 results call. Based on the above points, we would expect 2Q25 consensus EBIT excluding PIR to move lower.
Updating estimates Following 1Q25 results, we cut our EBIT excluding PIR forecast by -2% to SEK 10.2bn for 2025, leaving our estimate +1% above consensus. The downgrade was primarily driven by the mining division, reflecting the new volume and cost guidance on Somincor and Zinkgruvan. Conversely, we upgraded forecasts for the smelting division to reflect the stronger operating performance. Earnings forecasts for 2026 and 2027 were largely unchanged, but we increased capex estimates for these periods to reflect the latest guidance on completed acquisition. Consequently, we made significant cut to our FCF forecast as we expect smaller working capital release for 2025 and 2026. Detailed estimate revisions are provided in variance table overleaf. 1Q25 results recap Boliden delivered a beat in 1Q25 with EBIT excluding PIR +3% ahead of consensus, but the eliminations line was the driver of the beat, as it had flipped positive. FCF, while a temporary headwind from WC, was a significant miss. Capex guidance increased to SEK 15.5bn, solely driven by the completed acquisition. Milled volume and grade guidance for Boliden''s historic mines were unchanged for 2025. For a more in-depth summary of the quarterly results, please see our note here. FCF under pressure Boliden looks set for a difficult 2025 with copper and zinc TC annual contract settled at a historic low. Grade guidance also points to another year of relying on throughput to support volumes. The low grades continue to expose Boliden to production volatility from relatively minor deviations vs. mine plans. With breakeven FCF forecast for 2025 amid still elevated capex levels, there is limited scope to pay additional returns beyond the ordinary dividend.
What happened? Boliden reported a headline (EBIT, excl PIR) beat of +3% vs consensus, but the eliminations line was the driver of the beat, as it had flipped positive. FCF, while a temporary headwind from WC, was a significant miss (100% vs Bloomberg consensus). A call will be held at 8:30am UK time this morning to discuss the results. BNPP Exane View: Boliden reported 1Q25 EBIT, excluding PIR of SEK 2.6bn, +3% vs. Infront (the effective company compiled) consensus and BNPPE. However, this does include a positive eliminations line vs. expectations for a figure in the range of negative SEK 70-80m. If eliminations had been in that negative range it would have been a mid-single digit % miss vs. consensus. Strikes in Finland during the quarter were a SEK 100m headwind to operating profit, but the company had flagged this being a factor during the quarter. At the divisional level, Mines were a -20% miss vs consensus with Smelters the relative outperformer with a +16% beat. FCF of SEK -1.9bn was -68% vs BNPPE and -114% miss vs Bloomberg consensus, negatively impacted by a WC increase but positively impacted by SEK 350m in insurance proceeds. As a result, net debt of SEK 8.7bn was +9% vs BNPPE but -7% below Bloomberg consensus. However, we have concerns about the robustness of the net debt figure given the FCF miss. Little to say on tariffs other than Boliden''s estimated direct impact has been limited so far. 2025 FCF is expected to be positively impacted by SEK 2.0bn of insurance proceeds, o/w SEK 350m has already been received. Capex guidance increased to SEK 15.5bn, an increase of SEK 1.5bn which related entirely to the completed acquisition of Somincor and Zinkgruvan. Milled volume guidance for 2025 for Aitik and Tara are unchanged and grade guidance across Aitik, Garpenberg, Kevitsa, Boliden Area and Tara are unchanged.
In a nutshell: . BOLIDEN (-): Completion of share issuance Daily Prices as of March 20th / PRICE MOVERS . MACRO/COMMODITY WRAP: As part of a broader effort to boost development of natural resources, Trump has invoked emergency powers to boost the ability of the US to produce critical minerals, including potentially coal. An executive order was signed yesterday which taps the Defense Production Act as part of the effort to provide financing, loans and encourage faster permitting for critical minerals which will include uranium, copper, potash and gold as well as ''any other element, compound or material as determined by the chair'' of the National Energy Dominance Council which could include coal. The Defense Production Act was a 1950s law that was used to ramp up steel production for the Korean War. Former President Biden also invoked the law to encourage domestic production of critical minerals including lithium, nickel, graphite, cobalt and manganese. A committee on China previously recommended creating a strategic reserve of critical minerals in an attempt to insulate against price volatility. Base metals weaker in trading on the SHFE this morning; copper -0.8%, aluminium -0.5%, zinc -0.3%, nickel -0.2%. Alumina largely unchanged w/w at USD 433/t amidst ample supply in the morning. Despite the copper price touching USD 10,000/t the other day, the Yangshan copper cathode premium has actually increased 30% since the end of last week to USD 65/t, back to highs last reached in early February. Iron ore futures trading -0.8% lower in Singapore this morning and back below the USD 100/t level on concerns about demand in China as the steel industry is reportedly considering paying firms to shutter old plants in an effort to reduce overcapacity. Gold (3,030/oz) holds near record levels amid concerns over US tariffs which is supporting safe haven assets. . Macro data this week: US initial jobless claims (prev 220k) and Eurozone...
BOL BOL GLEN
Updating estimates Following 4Q24 results, we increase our EBIT excluding PIR forecasts by +3-11% for 2025-2027 but remain -18% below consensus on average through that period. The upgrades are primarily driven by the smelting division given outperformance relative to expectation. Conversely, we downgrade forecasts for the mining division to reflect the weaker operating performance and incorporate the latest reserves estimate for Kevitsa. Consequently, we upgrade our 2025-2027 FCF estimates to reflect the higher earnings forecasts. However, there is a smaller impact to EPS given upward revisions to taxes and interest. Detailed estimate revisions are provided in variance table overleaf. 4Q24 results recap Boliden reported a solid 4Q24 beat with EBIT excluding PIR +6% ahead of consensus amid improved performance at smelters. FCF was the highlight amid strong working cap release during the quarter. 2025 capex was increased to SEK 14.0bn to include the SEK0.5bn roll-over from 2024. The board proposed to cancel the ordinary dividend for 2024 to reduce the proposed share issue. For a more in-depth summary of the quarterly results, please see our note here. FCF to remain pressured in 2025 Another year of flat/lower mined grades, lower TCRC contract for smelters and still elevated capex levels: all will likely continue to pressure FCF yield this year (BNPPE +2%). Operating low grade mines also continues to expose Boliden to production volatility from relatively minor deviations vs mine plans.
What happened? Boliden reported a solid 4Q24 beat with EBIT excluding PIR +6% ahead of consensus amid improved performance at Smelters. FCF was the highlight with strong working cap release during the quarter. 2025 capex was increased to SEK 14.0bn to include the SEK0.5bn roll-over from 2024. The board proposed to cancel the ordinary dividend for 2024 to reduce the proposed share issue. Boliden will host a call to discuss the results this morning at 8:30am UK time. BNPP Exane View: Boliden reported 4Q24 EBIT excluding PIR of SEK3,814m, +6% ahead of both Visible Alpha and Company compiled consensus. The beat was driven by strong performance at the Smelters (+18% ahead of Company compiled consensus). Smelter''s profitability increased q/q, primarily due to the inclusion of insurance income and higher prices. Mines profitability moderated q/q (-32% below consensus), primarily driven by lower volumes (production limits in Garpenberg and lower gold grade in the Boliden area), partially offset by higher prices due to stronger USD. Costs also increased due to seasonality and the startup of Tara. FCF during the quarter of SEK 4,264m was a strong beat to consensus, thanks to SEK 3,733m working cap release. Net debt reduced to 10,662m amid strong cash flow and was -27% below consensus. 2025 capex was increased to SEK 14.0bn from SEK 13.5bn. The 2025 capital expenditure guidance includes a SEK 0.5 billion roll-over from 2024, while the combined spend for 2024 and 2025 is unchanged. Planned maintenance shutdowns in Smelters during 2025 are estimated to impact operating profit by SEK -500m (vs. SEK -400m in 2024). The strikes in Finland that started early 2025 have so far had an estimated impact on operating profits by just over SEK -100 m. The Board of Directors proposes to cancel the ordinary dividend for 2024 (would have been cSEK 3.3bn), in order to reduce the proposed share issue with the corresponding amount. The remaining equity will be raised through a...
What happened? Boliden announced the acquisition of the Neves-Corvo and Zinkgruvan mines from Lundin (NC) for an upfront cash consideration of $ 1.3bn and contingent payments up to $ 150m. The deal is expected to close in 1H25. BNPP Exane View: Ultimately, this deal was not a surprise, as we have previously written, as Boliden has been tied to these two assets for several months (Dagens Industri article, September 2024). The valuation is in-line with Visible Alpha consensus and will be financed by a bridge loan which is expected to be refinanced through a share issuance in the amount of half the bridge loan and the remainder in medium and long-term debt. The share issuance (equivalent to 9% of current market cap) is expected to be completed in 1H25 and will require authorisation from a general meeting. Post the deal, zinc and copper concentrate production will increase from 35% to 70% zinc smelting capacity and 30% to 40% of copper smelting capacity, per Boliden estimates. Metal production subsequently increases by 95% for zinc and 43% for copper. Boliden expects an EBITDA contribution from the mines of $ 300-350m per annum over the next five years. From a gearing perspective, Boliden estimates the ratio to be 30% post the completion of the transaction, above the 20% target level but anticipates bringing the level back down towards the target level within three years. Neves-Corvo is an underground zinc-copper-lead-silver mine in Portugal and produced 108kt of zinc and 34kt of copper in 2023, generating $ 91m of EBITDA. It is on the 75th percentile of the cash cost curve for both copper and zinc. Zinkgruvan is an underground zinc-copper-lead-silver mine in Sweden and produced 76kt of zinc and 4kt of copper in 2023, generating $ 104m of EBITDA. It''s position on the cash cost curve is estimated to be the middle of the second quartile for zinc.
Boliden shares have outperformed peers on a 1- and 3-month basis, something we find hard to justify fundamentally. With a weaker outlook for mined grades, a big contract reset coming for the smelting business and lacklustre FCF generation for the new few years, we downgrade to Underperform (from Neutral) and cut our TP to SEK275 (from SEK305). Facing a difficult 2025 Another year of flat/lower mined grades, a big TCRC contract reset for smelters and still elevated capex levels: all will likely continue to pressure FCF, which should improve y/y but only to just about break-even on our forecasts. Operating low grade mines continues to expose Boliden to production volatility from relatively minor deviations vs mine plans. With MandA risk While mgmt. understandably won''t comment on specifics, several reports (ie Dagens Industri ,13 Sept 2024) has linked Boliden to potentially acquiring Lundin Mining''s (NR) Zinkgruvan and Neves-Corvo mines. Visible Alpha has a consensus NAV valuation of USD0.4bn and USD1.1bn for those assets respectively. On the 3Q24 results call, Boliden mgmt. stated they would not want to go above 40% gearing (24% currently) and on the 2Q24 call noted they ''wouldn''t rule out'' an equity raise to fund the purchase of the right asset. The delta between the 24% and 40% gearing implies about USD950m of headroom. If Boliden just went after Zinkgruvan, it would likely be fine but if it went after Neves-Corvo or both then it creates a higher probability of a potentially dilutive equity issuance. Cutting outer-year estimates and TP, downgrading to Underperform (from Neutral) 2024 earnings upgrades are driven by better-than-expected 3Q24 and a SEK935m insurance claim to be booked in 4Q24. With new guidance for 2025 mine grades and another reduction in our forecast copper TCRC contract for 2025, we cut 2025 EBIT excl. PIR by -7%, leaving our 2025 and 2026 forecasts -18% and -5% vs consensus. TP cut to SEK275 (vs SEK305) and rating to Underperform.
What happened? Boliden reported a solid 3Q24 beat with EBIT excluding PIR +30% ahead of consensus and beats across both Mines and Smelters with improved operation performance. The guidance on 2025 grades might pare some enthusiasm but it was encouraging to see the underlying improvement come from a combination of volumes and costs. Call this morning at 8:30am UK time. BNPP Exane View: Boliden reported 3Q24 EBIT excluding PIR of SEK 2,999m, +30% ahead of Visible Alpha consensus. The beat was across both Mines (+37% vs consensus) and Smelters (+34% vs consensus), and there was even a slightly larger negative Eliminations line than had been expected. Mines profitability jumped q/q, more than doubling, primarily driven by higher production as seen by record milled tonnage at Garpenberg. Tara is ramping up in preparation for milled production in January 2025. In the q/q bridge, the sequential improvement was also aided by seasonally lower costs. Smelters also recorded a large q/q increase (+124%) with record production of copper cathodes at Harjavalta. Construction of the new tankhouse at Ronnskar remains on track for full capacity by 2H26. FCF during the quarter of -SEK 495m was +12% vs consensus but still showing a deeply negative number. Net debt increased +3% q/q to SEK 14.8bn and was -5% below consensus. 2025 capex guidance for SEK 13.5bn had previously been disclosed. Guidance on the 2025 grade for the Mines unit looks a bit light, pointing to a slightly lower copper grade (0.16% vs 0.17%) at Aitik and zinc grade (3.3% vs 3.5%) at Garpenberg. Boliden Area has a flat zinc profile but will have lower gold by-products.
Updating estimates post 2Q24 results Following 2Q24 results, we cut our EBIT excluding PIR by -3% to -5% for 2024-2026 and remain -8% below consensus on average through that period. There is a greater impact to 2024 EPS given the lower base and upward revisions to taxes and interest. The downgrades are primarily driven by the mining division given continued underperformance relative to expectations. Conversely, we upgrade our 2024 and 2025 FCF estimates as SEK 600m of the cash insurance proceeds were received in 2Q24, another SEK 400m is now expected to be received in 2H24 and the remaining SEK 1.4bn is now guided to be received in 2025. These are now being reported through WC changes to align with company reporting. Aside from timing of receipt of the cash insurance proceeds, our underlying cash flow assumptions are largely unchanged. Given the earnings downgrades, our TP decreases to SEK 330/sh (prev SEK 340/sh) and remain Neutral rated. For a more in-depth summary of the quarterly results, please see our note here.
2Q24 earnings came in line in a messy quarter Boliden reported 2Q24 EBIT excluding PIR of SEK 4.0bn, in-line with Visible Alpha consensus. The Infront consensus, which has less contributors, would imply a miss. Given the one-offs from 1Q24 (strikes, weather) into 2Q24 (insurance income SEK2.4bn, Tara restart -SEK358m) we had been expecting a volatile quarter. Mines fell short of expectations at SEK 1.1bn (-38% vs. cons.), partially impacted by the delayed ramp up of the Liikavaara satellite pit. The beat was from Smelters, where the insurance income was generated. Higher metal prices had a positive impact during the quarter, but treatment charges and premiums contributed negatively to Smelters. FCF beat on working cap and insurance proceeds FCF surprised to the upside with a positive SEK 401m vs. VA cons for negative SEK 2.3bn. This did include receipt of SEK 600m of insurance proceeds which was likely not in consensus numbers. An additional SEK 400m of insurance proceeds is expected during the second half of 2024, The WC investment was also much smaller than expected at SEK 567m vs. VA cons for SEK 1.7bn. The combined WC and insurance impact would amount to c.65% of the FCF beat. Market development and outlook Treatment charges on the spot markets continued to fall, reaching record lows for copper, and reflecting a larger concentrate deficit expectation for 2025. Zinc concentrate supply in China also tightened, reflected falling in port concentrate stocks. Capex guidance of SEK15.5bn remained unchanged for 2024. Operating loss in Tara during the second half of 2024 is estimated at EUR -25m per quarter as previously guided.
Q1e: higher volumes, but strikes weigh on EBIT. March metal rally supply-driven, but demand still weak. HOLD: recent performance leaves little valuation upside.
Q1e: we have EBIT excl. PIR up 26% q-o-q. Estimates lowered for Smelters, Mines fairly unchanged. Decent Q4, but let's not get too carried away – HOLD.
Valuation has corrected: HOLD (Buy), TP SEK 295 (305). FX loser at current rates, '24e-'25e EBIT down 4-3%. Q4e: bottom-up issues continue with lower Aitik production.
2023 was expected to be the peak in capex but 2024 guidance implies only a marginal step lower in spend (SEK14bn vs SEK15bn) even before considering a yet to be announced budget for the tank house at Ronnskar which insurance will not cover 100%. We forecast negative FCF generation continuing in 2024 before returning to positive in 2025 albeit with the caveat that the majority of the tank house spend, net of insurance, could likely weigh on that estimate. 3Q23 wrap Earnings recovered in 3Q23, from a low base in 2Q23, led by Smelters. Group level EBIT was +4% ahead of consensus. FCF remained negative but better than feared and also hampered by a cSEK400m WC investment. 2023 capex guidance was reiterated at SEK15bn and 2024 guidance was introduced at SEK14bn (+4% vs consensus) which notably does not include anything for potential tank house capex. Smelter update The feasibility study for a new tank house is ongoing and Boliden is hopeful to provide an update in 1Q24. Ronnskar has adjusted its business model from cathode to anode sales but with it comes the loss of refining charges, free metals and premiums, partially offset by lower variable costs. Boliden estimates the y/y EBIT impact from the fire at SEK1bn. The increased working capital levels of cSEK1bn is expected to begin to be unwound in 4Q23 which we have factored primarily into our 2024 FCF forecasts. Estimate revisions We upgrade our 2023 EBIT forecast +10% on improved performance in Smelters but cut 2024 and 2025 EBIT forecasts by -13% and -14% on lower zinc price forecasts impacting Mines. We continue to derive our TP via a 50/50 weighting of DCF-based NPV and ROCE/WACC. As such, our TP declines to SEK290 (prev SEK300) and reiterate Neutral.
EV/CE 1.13x and share 19% below our MTM model means flat prices are enough to justify a BUY (Hold). '23e-'24e EBIT down 2-5% on soft grade guidance.
After a dismal Q2, there was some respite for Boliden in Q3. While the results were mixed compared with the market’s expectations (which triggered another sell-off), there were some positives – especially in top-line terms. Although it would be premature to expect that all the (operating) issues will soon be resolved, the ability to navigate volatile commodity markets was evident in the divisional dynamics (even when operations are far from optimal). Hence, the market’s nervousness remains a buying/accumulating opportunity.
Back to normal in Q3e after a messy Q2. EBIT excl. PIR down 4-1% for '23e-'25e. 1.33x '23e EV/CE is low, but so is ROCE: HOLD.
Costly copper supply needed to cover growing demand. Zinc struggling on weakness in Chinese construction. HOLD.
2Q23 results were significantly weaker than expected and perhaps most damaging was that the weakness, relative to expectations, was driven by Mines rather than Smelters which was impacted by the fire. FCF now looks to be negative for 2023 and 2024 with the cell house rebuild at Ronnskar (update towards end of year) presenting additional potential downside to cashflow in 2024. 2Q23 Wrap EBIT excluding PIR of SEK 833m was 50% below COVID lows of 1H20 while FCF of negative SEK 3.8bn pushed gearing (still just 20%) to their highest level since 2Q17. Please see here a more detailed breakdown of 2Q23 results. Smelter rebuild remains an unknown The timeline and cost to rebuild the cell house at Ronnskar is yet to be quantified. A feasibility study has been launched and Boliden hopes to be able to provide an update, along with an investment decision, by the end of the year. Our understanding is that insurance will likely cover a majority of a new cell house but not all of the capex. At this time, we do not factor into our forecasts any additional capex nor insurance proceeds. Cutting estimates and TP We cut forecast EBIT excluding PIR by -22% in 2023 and -11% in 2024. While 2023 downgrades are driven by both Smelters and Mines, it is the latter driving the 2024 downgrades vs our prior forecasts as we see the weaker operational performance persisting. Whereas previously we saw a resumption of special dividends in 2025, this is now pushed out by an additional year with the dividends through 2030 not returning to the bumper years of 2021 and 2022 (average SEK 26.25/sh total dividend per annum). FCF is now forecast negative in both 2023 and 2024 before returning to a high-single digit yield in 2025 on today''s share price. The caveat on 2025 capex would be the cell house rebuild and compensation from insurance which is still unknown. Reiterate Neutral rating with SEK 300 TP (prior SEK 315).
Boliden delivered a very poor set of numbers, with adj. EBIT excl. PIR 43% below Infront consensus, mainly due to the Mines segment.
On the back of extreme endogenous and exogenous headwinds, Boliden reported dismal Q2 results. Disappointingly, the weakness in Mining was worse than Smelting – where a massive fire accident crippled operations. The situation was further complicated by a difficult macro/operating environment. While the issues may not subside anytime soon, today’s colossal sell-off and the significant share price weakness in recent months has opened up an opportunity to bank on a firm that’s capable of gradually addressing Europe’s foreseeable future (critical) metal-sourcing challenges.
Boliden has faced multiple headwinds in short order; Ronnskar fire, weak Kevitsa grades and Tara placed on care and maintenance. These further pressure what was already set to be weak FCF in 2023/2024. We cut estimates but upgrade to Neutral with shares now reflecting the tough outlook. Known 2Q23 Headwinds We previously detailed Boliden''s 2Q23 warning here. The SEK 700m headwind to 2Q23 is predominantly driven by the mining division (Tara and Kevitsa) while Ronnskar is a SEK85m headwind per week while production is totally stopped. In our model, we have assumed Tara remains on care and maintenance for one year and the Ronnskar smelter doesn''t return to full cathode production for two years. We await further guidance, potentially with 2Q23 results on 21 July, on the level of asset impairment, capex required for a new cell house and how much insurance will cover. FCF Generation Will Remain Weak While we leave our capex estimates unch pending firmer guidance on the Ronnskar cell house rebuild, the cuts to our EBITDA forecasts now push our 2023 FCF forecast to be slightly negative (prev slight positive) and 2024 yield remaining 3%. FCF into 2025 will improve (7% yield) but cash conversion of 29% is still forecast below that of 2020-2022 (35% average). Updating Commodity Deck We update our commodity price deck, detailed in the sector note here this morning. For the 2023 metal price forecasts most relevant to Boliden, copper is held flat vs prior, nickel -6% on oversupply from NPI and zinc -15% on construction exposure. Upgrading to Neutral, TP SEK 315/sh Alongside reflecting the revised commodity deck, we have cut our 2023 and 2024 EBITDA forecasts by -13% and -10% respectively, leaving us -14% below a still volatile consensus for both years. We reduce our TP to SEK 315/sh (prev SEK 325/sh) and upgrade to Neutral (from Underperform) as the share price weakness has, in our opinion, reflected the medium-term challenges.
Based on our recent discussion with Boliden’s IR, it is clear that the recent smelter incident has dealt a major blow to operations. A key limitation would be the inability to capture the value of free metals (primarily gold), which is expected to take a toll on profitability. The good part is that the impact of this event is well-insured. Also, drawing a parallel with Norsk Hydro (faced with a similar situation a few years ago), we remain confident of the Swedish firm’s rebound.
The fire that impacted the Ronnskar smelter last night has been limited to the cell house and adjacent infrastructure but the cell house has been completely destroyed, stopping other production at Ronnskar for safety considerations. Production, except electrolysis, is expected to resume within weeks but each week that all production is stopped, Boliden estimates it to be a SEK85m headwind. The potential writedown of asset values as a result of the fire is too early to be estimated. In 2022, Ronnskar was 21% of smelter EBIT and 8% of group EBIT. SEK 700m Headwind to 2Q23 Boliden estimates the stopped production at Ronnskar and lower than previously expected grades at Kevitsa and Tara to have a cumulative SEK 700m headwind to 2Q23 EBIT (Visible Alpha 2Q23 EBIT consensus SEK 3.3bn). Boliden will report 2Q23 results on 20 July. The mine plan has been adjusted at Kevitsa, pushing more lower grade material into 2Q23 with expected spill-over impacts into 2H23. The expected 2Q23 copper and nickel grades at Kevitsa of 0.21% and 0.16% and materially below the reserve grades of 0.34% and 0.23%, respectively. Tara has also been affected by lower with 2Q23 zinc grade now expected to be 4.7% (1Q23: 5.3%). The impact to the Mines division during the quarter is estimated to be SEK 500m. The total SEK 700m headwind (Mines + Smelters) also includes the impact of underperformance at the Garpenberg mill (previously communicated unplanned repair shutdown in 1Q23) which had affected the beginning of the quarter. Tara Placed on Care and Maintenance Boliden has also placed its Tara mine in Ireland on care and maintenance, resulting in production and exploration ceasing temporarily at the mine. The high-cost zinc mine has struggled with currently negative cash flow driven by a combination of operational challenges, declining zinc prices, high energy prices and cost inflation. In 2022, Tara was 5% of Mines EBIT and 3% of group EBIT. Not Reflected in our Estimates We...
Boliden is unique in its offering of Nordic base metals exposure but low grades and cost inflation which has yet to peak points to continued margin pressure. With a significant y/y increase in capex for 2023 (SEK 15bn, 50/50 projects and sustaining) FCF will be under pressure and while rebounding in 2024 will be just half of the 2021/2022 average. FCF Pinch Point With 2023 EBITDA forecast -17% y/y and capex +50% y/y, FCF is forecast to come under significant pressure (-90% y/y). From such a low base (cSEK700m) we forecast a multiple jump in 2024 (flat earnings, lower capex) to SEK3.4bn but will still be half of the average achieved in 2021/2022. Less to Gain from Energy Cost Deflation Boliden is 60% hedged for its electricity consumption through 2035 and 80% for the next two years at an average price of EUR 35/MWh. This was a tailwind vs peers last year and while not an absolute headwind as its remaining 20% spot exposure will benefit, it has less to gain as prices normalise. Below Consensus for 2023 and 2024 Post 1Q23, we are materially more conservative than consensus. On average we are 9% below on consensus EBITDA for 2023/2024 and 39% below on FCF though in many ways this is the nominal drop down from EBITDA to the lower base comparison of FCF. We are more aligned with consensus for 2025 and forecast FCF surpassing SEK 7bn, returning to the recent peak of 2021 (SEK 7.2bn). Investment Case The Aitik mine continues to operate in a low grade (0.17%) zone as the next pushback should help grades return and exceed reserve in future years. We see 2025 FCF returning more to historical averages, however if further potential projects were to be approved (not in our numbers are Kevitsa pushback and Tara Deep expected to be 2024/2025 FIDs) this could negatively impact this trajectory. Underperform, SEK 325 TP Our SEK 325 TP is derived via a weighted average of ROCE/WACC 2023E (50%) and DCF (50%). See our sector note published today.
2023 began on a weak note for Boliden with the Q1 results missing the street’s expectations. Volumes were a key challenge, especially in Mining. While the stock fell >7% on the day of the results release, we believe that the current level offers an attractive entry opportunity, thanks to intact underlying virtues – including well-balanced Mining and Smelting exposure, FX benefits, valuable precious metal exposure, a strong balance sheet, abating cost headwinds and a unique European metals proposition.
Challenges at mines, while smelters performed robustly. Limited on capital returns Q4 EBIT excluding PIR at SEK3.2bn was a 4% miss to consensus, mainly driven by weak production at mines on lower grades. As flagged at the CMD at the end of last year, weak grades at Aitik are the current challenge (as low as 0.17% potentially, but temporarily). Smelter production was stable, helped by record high gold production. The balance sheet has improved sequentially with a small net cash position after a large working cap release in Q4 (cSEK3.2bn), driven by a reduction in inventory of nickel and precious metals. Inflation pressure is expected to extend into 2023 but taper off. With Boliden pursuing multiple (medium sized) projects at the same time, its capex profile looks to remain busy for the next couple of years, weighing on the group''s ability to surprise positively on capital returns. Company update and market outlook Boliden has a commodity suite well suited to the future energy transition and has seen its pricing basket aided by some supply-side disruption. A short mine life and flooding impacting underground exploration at the Tara zinc mine in Ireland could have a knock-on impact on the Odda zinc smelter expansion. Capex is guided to increase c50% YoY in 2023 while Aitik faces further low mined grades, creating headwinds for FCF and dividends. We structurally like copper and nickel as commodities while zinc has also done well on European production suspensions. The smelting business benefited from the rise in TCs, metal prices, and acid prices, but spot TCs have softened and sulfuric acid has come down materially, suggesting smelting earnings have likely peaked. Both Class 1 battery grade and stainless steel Class 2 grades have been weak over the last 3+ months. Valuation revised to SEK384 on lower mine production and higher discount rate. Increasing risk in Latin America reflects favourably on Boliden''s Nordic presence in terms of copper...
2022 ended on a mixed note. A combination of volume challenges, moderating prices and higher costs restrained the Q4 results. While the 2022 results were at record levels – which also fuelled an impressive shareholder rewards package – and Smelting outperformed Mining – something which may continue in the near future – a normalising medium-term earnings trajectory seems inevitable. Moreover, with aggressive spending plans, rewards too should normalise. But given Boliden’s unique metals proposition (very valuable for Europe), the stock should be bought/accumulated at lower levels.
Despite healthy prices, Boliden’s Q2 results missed street expectations. Besides guided maintenance shutdowns, the impact of spiralling cost inflation was evident in both divisions. Moreover, given the ferocious commodity pricing correction underway since late Q2, further operating performance normalisation in the coming quarters seems inevitable. However, by virtue of its smelting exposure, precious metal diversity and valuable SEK-driven tailwinds, Boliden seems ‘relatively’ better positioned to withstand the market challenges. While our recommendation is reiterated, more near-term share price volatility still cannot be ruled out.
On the back of war-induced pricing euphoria, Boliden reported exceptional Q1 22 results, with both divisions performing well. While prices helped dwarf cost concerns in Q1, this may not be the case in the coming quarters. Moreover, with serious growth concerns in the Swedish firm’s focus markets, the sustainability of the current results looks increasingly difficult. While Boliden is an apt and well-balance proxy for Europe’s long-term metal demand, it is also risky given the brewing challenges.
After a disappointing Q3, Boliden has reported impressive Q4 results and summed up to healthy 2021 results. Broad-based price gains (and Q4 FX tailwinds) overshadowed volume disruptions and (brewing) cost challenges. Management again announced attractive shareholder rewards. However, various cost risks and pricing vulnerabilities lie ahead. While Boliden by virtue of its business model remains well-positioned to withstand market volatility, for now, the downside risks are higher and, hence, we maintain our cautious stock recommendation.
Although Boliden reported soft Q3 results – largely due to guided maintenance shutdowns and some unexpected production issues – the firm remains in a strong position to leverage favourable market dynamics. Besides the near-term disruption in (European) zinc markets, the recovery in smelting charges is a good omen. Furthermore, the firm’s strong positioning in Europe – where demand fundamentals are ‘relatively’ more stable vs. the likes of China – makes the Swedish firm a good sector bet.
On the back of healthier prices, this time Boliden reported decent Q2 operating results. Although the performance fell below expectations. Mining continued to do well, but Smelting came under some pressure. While Boliden remains an attractive European bet, the near term is likely to be restrained by market volatility, planned maintenance shutdowns and growing inflation risk(s).
Continuation of price tailwinds supported Boliden’s Q1 results, despite production challenges in mining, TC worries in smelting and FX headwinds. Both divisions managed healthy results. While eventual commodity market normalisation and guided smelter maintenance should gradually result in capped/retreating margins, Boliden’s (cash) return generation capabilities should remain intact. Hence, the Swedish miner-smelter remains attractive, but with limited upside.
Despite the pandemic, Boliden posted healthy results. Interestingly, the performance resilience was led by both divisions – which typically exhibit contrasting fortunes. These intriguing dynamics translated into healthy cash flows and, hence, impressive shareholder rewards. While commodity markets seem expensive at present, the group’s ability to limit performance erosion in weaker markets and the added benefit of sizeable precious metal exposure are valuable virtues. Hence, our positive recommendation should be maintained.
