Full-year results from Finnish nickel and zinc producer
The funds will help boost nickel production from 16,087 tonnes in 2011 to 50,00 tonnes this year. But the cash call wasn't well received – the shares dropped sharply on the news, probably reflecting the scale of Talvivaara's cash consumption and the growing debt pile. In fact, net debt rose 45 per cent in the year. It also coincides with significant management changes. Following Pekka Perä's decision to step down as chief executive in October, after news of production glitches, the group announced that Harri Natunen will take the helm in April.
Operationally, Talvivaara narrowed full-year losses and boosted production. Indeed, buoyed by an especially robust December performance, the group managed record quarterly production of 4,769 tonnes of nickel and 10,524 tonnes of zinc – leaving current production targets looking achievable. Moreover, there's evidence that nickel and zinc prices are in the ascendancy, particularly if the rebound in Chinese stainless steel production remains sustainable.
Analysts' consensus estimates for adjusted 2012 EPS stand at 14.3¢ (a loss per share of 3.4¢ in 2011).
|TALVIVAARA MINING (TALV)|
|ORD PRICE:||304p||MARKET VALUE:||£747m|
|TOUCH:||302-304p||12-MONTH HIGH:||608p||LOW: 180p|
|DIVIDEND YIELD:||nil||PE RATIO:||na|
|NET ASSET VALUE:||125¢||NET DEBT:||141%|
|Year to 31 Dec||Turnover (€m)||Pre-tax profit (€m)||Earnings per share (¢)||Dividend per share (¢)|
The hefty debt pile, and memories of October's production problems, won't help sentiment. And the shares, trading on 26 times expected earnings, are hardly cheap, meaning any further slip ups could see them tumble further. Sell.
Last IC view: High enough, 317p, 18 Aug 2011