A 31 per cent increase in silver and a near-tripling in gold production was always going to be good news for Hochschild Mining (HOC), but a sharp swing to operating profits of $75.8m (£58.3m), from a loss of $26.6m a year ago, was still well ahead of expectations. This was in part due to a 27 per cent drop in all-in sustaining costs per ounce of silver equivalent, thanks to a mixture of operational efficiencies and improving grades, though a 154 per cent increase in gross revenue from gold sales was the real boost.
But perhaps the starkest comparison with last year's interim figures lies in the balance sheet. A year ago, net debt stood at a heady 5.8 times cash profits, but Hochschild now says its net debt is equal to annual adjusted cash profits. With the cash balance up and borrowings down 15 per cent since the turn of the year, management felt it prudent to bring back the dividend, albeit at a more modest proportion equivalent to a quarter of net earnings.
Analysts at Numis Securities are forecasting full-year adjusted pre-tax profit of $111m and EPS of 11¢ this financial year, against losses of $256m and 52¢ a share in 2015.
HOCHSCHILD MINING (HOCH) | ||||
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ORD PRICE: | 295p | MARKET VALUE: | £1.49bn | |
TOUCH: | 294-295p | 12-MONTH HIGH: | 328p | LOW: 39p |
DIVIDEND YIELD: | 0.4% | PE RATIO: | na | |
NET ASSET VALUE: | 134¢ | NET DEBT: | 35% |
Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
---|---|---|---|---|
2015 | 190 | -43.4 | -11.0 | 0.0 |
2016 | 339 | 60.3 | 6.0 | 1.4 |
% change | +78 | - | - | - |
Ex-div: 1 Sep Payment: 22 Sep £1 = $1.30 |