Highest quarterly profit since 2012
24 Oct 16
Boliden reported exceptionally strong Q3 16 results, with profitability materially exceeding AlphaValue’s estimates. Sales came in at SEK9.7bn (-0.3% yoy; +1.4% qoq) as the solid contribution from mines (+44% yoy; +28% qoq) – on the back of extremely strong zinc prices and healthy volumes – simultaneously translated into higher internal sales (+50% yoy; 42% qoq). Profitability was a big surprise, with adjusted EBIT galloping (+74% yoy; +94% qoq) to SEK1.5bn. Both mining and smelting delivered handsomely with divisional profitability of SEK804m (+209% yoy; +61% qoq) and SEK825m (+27% yoy; +102% qoq), respectively. Besides zinc’s colossal run (+41% ytd) and a turnaround in inventory revaluation fortunes (gain of SEK212m in Q3 16 vs. loss of SEK175m in Q3 15 and a negligible gain of SEK11m in Q2 16), consolidation of Kevista (acquired in Q1 16), seasonally lower costs and less severe maintenance shutdowns helped profits reach record levels. Quarterly net profit came in at SEK1.1bn – the highest since Q1 12. Although reported OCFs came in much weaker at SEK1.1bn (-41% yoy; -49% qoq) due to working capital investments of SEK1.1bn vs. release of SEK36m and SEK837m in Q3 15 and Q2 16, respectively. As a result, net debt remained unchanged (vs. Q2 16) at SEK10.4bn. No maintenance shutdowns have been guided for Q4 16.
Mining compensates for lacklustre smelting; although Brexit implications could be critical
19 Jul 16
Boliden reported ahead of consensus results for Q2 16. Unlike Q1, this quarter witnessed a performance reversal in the mining and smelting divisions. Sales came in at SEK9.6bn (-7.5% yoy; +8.4% qoq), with the recovery in commodity markets rendering an ample sequential cushion. While mining volumes across commodities remained healthy, smelting volumes sagged (especially qoq) due to maintenance shutdowns.
Q1 shines (sequentially); but forex and market risks loom large
06 May 16
After a disastrous Q4 15, Boliden’s Q1 16 results were comforting. Despite sales coming in behind consensus estimates, profitability was clearly ahead. Sales were down 15% yoy to SEK8.8bn as weak commodity prices (copper and zinc down 20% and 19%, respectively) more than offset decent mining volumes (particularly zinc (+11%) reaching record highs on account of operational efficiencies). Although the sequential top-line impact (-8.8%) was less severe as the effect of still lower copper prices (-4.1%) was partly compensated by higher zinc (+4.2%) and gold (+7%) prices. Additionally, unlike previous quarters, healthy support from a weaker SEK (vs. USD) was missing. Adjusted EBIT came in at SEK888m (-26% yoy; +1.1x qoq) with the yoy underperformance largely reflecting the impact of abysmally weak prices (with mining EBIT correcting 50%). But the sequential improvement was attributable to: 1/ some bounce-back in metal prices, benefiting both mining (through higher zinc exposure) and smelting (through SEK119m of inventory revaluation gains vs. a loss of SEK181m in Q4 15); 2/ operational efficiency at smelters, while mining benefited from favourable comps due to a provision (for the reclamation of a decommissioned tailings pond) of SEK40m in Q4 15; 3/ Q4 15 profit being impacted by SEK45m of delayed recognition of certain expenses (mainly impacting smelting). The bottom-line witnessed a similar trend with net profit of SEK656m vs. SEK896m and SEK288m in Q1 15 and Q4 15, respectively. However, the OCFs were dissimilar to the profitability trends as yoy working capital efficiencies – use of SEK449m vs. SEK1bn in Q1 15 and SEK143m in Q4 15 – resulted in reported OCFs of SEK1bn (+39%; but -19% qoq). Management guides for a SEK215m impact of smelter maintenance shutdowns in 2016, of which SEK165m is expected in Q2 and the remaining SEK50m in Q3. In sharp contrast with mining peers, in Q1 16, Boliden announced a SEK5.7bn ($712m) acquisition of Kevitsa nickel-copper mine in Finland. The transaction is expected to close by June 2016 and would be financed via a 24-month committed bank facility from Nordea – with other long-term financing options being evaluated simultaneously.
A disastrous Q4 takes the sheen off the full year
15 Feb 16
Even though Boliden managed to post healthy growth in profitability for 2015, unlike any other miner in today’s environment, an abysmally weak Q4 – the worst quarter since Q1 14 – has blemished the business recovery witnessed so far. The group's profitability (Q4 in particular) was materially behind AV's and consensus' estimates. Consequently, the share price tanked 16% on the day of the results' announcement. *Top-line grows – even though forex-driven* Sales: Q4 – SEK9.7bn (+0.9% yoy; -0.7% qoq); 2015 – SEK40bn (+9.1% yoy; 1.9% behind AV's estimates) Despite relentless copper and zinc price pressure throughout 2015, SEK tailwinds (c.SEK3bn), healthy volumes (except for copper smelting; down 4% yoy) – including commissioning of the nickel smelter (Q3 onwards) and favourable TC/RC and premiums rendered ample support to the top-line. However, fading forex gains (especially qoq), and maintenance shutdowns and disruptions-induced lower smelting volumes weighed on the Q4 sales. *Profitability collapses in the last quarter* Adjusted EBIT: Q4 – SEK416m (-64% yoy; -53% qoq); 2015 – SEK3.6bn (+30%) After a resilient mining performance during 9m15 (generating EBIT of SEK1.4bn; +67% yoy), the segment gave in to the market atrocities. Q4 EBIT was reduced to insignificant levels of SEK31m vs. SEK461m and SEK260m in Q4 14 and Q3 15, respectively. While weaker prices (SEK660m negative impact) eroded year-on-year profitability, higher seasonal costs had a material sequential impact. Smelting – apparently a natural hedge to commodity prices – weakened too (-43% yoy; -38% qoq) due to maintenance shutdowns and disruptions, in addition to the factors impacting mining (although smelting’s price pressures were less acute). While the revaluation of process inventory continued its losing streak in a falling market – ending the year with a loss of SEK420m vs. a gain of SEK154m in 2014. The operating disappointment also resulted in Q4 net profit coming in at SEK288m (-66% yoy; -55% qoq), although full-year net profit was up 39% to SEK2.6bn – devoid of any asset impairments and forex losses. Citing the full-year bottom-line resilience, dividends were increased 44% to SEK3.25 per share. While working capital requirements were materially up both in Q4 and 2015, reported OCFs for Q4 were down 40% to SEK1.2bn and for 2015 they were up 7.7% to SEK6.2bn. As a result, the pace of deleveraging lost momentum in the last quarter, ending with a net debt of SEK4.8bn vs. SEK4.9bn and SEK6.8bn in Q3 15 and Q4 14, respectively. Management guides smelter maintenance shutdowns in 2016 will have a profitability impact of SEK215m – o/w SEK165m is expected in Q2 with the remainder in Q3.
Good Q2 results despite the continuing market uncertainty
20 Jul 15
Similar to previous quarters, a combination of a continuously weak SEK and operating improvements were still the key drivers for Boliden. Even though some momentum has been lost translating into slightly behind consensus Q2 15 results, the improvement is still sizeable enough.