A big leap in the cost of sales wiped the shine off a year of guidance-exceeding production for Hochschild Mining (HOC). Much of this was already telegraphed, but it is always painful to see a 35 per cent fall in operating profit spelled out in black and white.
Then again, past performance is not always a guide to the future, even if expected all-in sustaining costs of as much as $990 (£707) per ounce of gold-equivalent (or $13.40 in silver terms) will keep the pressure on margins. But investors should make some room for optimism. All things being equal, the recent switch from expensive bonds to cheap bank loans means annual interest payments are set to drop by around $20m in 2018. Argentinian corporate tax has fallen and will fall again. And the one-off charges that caused the bump in the $125m-$135m sustaining and development capital forecast this year should subside in 2019.
On average, analysts expect adjusted pre-tax profit of $98m and EPS of 9.5¢ in 2018, compared with estimates of $84m and 6.5¢
| HOCHSCHILD MINING (HOC) | ||||
| ORD PRICE: | 218p | MARKET VALUE: | £1.11bn | |
| TOUCH: | 218-223p | 12-MONTH HIGH: | 338p | LOW: 204p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 144¢ | NET DEBT: | 13% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013* | 622 | -120 | -27.8 | nil |
| 2014* | 493 | -68.2 | -14.7 | nil |
| 2015 | 469 | -256 | -52.0 | nil |
| 2016 | 688 | 108 | 9.0 | 2.76 |
| 2017 | 723 | 64.1 | 8.0 | 3.35 |
| % change | +5 | -41 | -11 | +21 |
| Ex-div: | 10 May | |||
| Payment: | 1 Jun | |||
| £1=$1.40 *Adjusted for 2016 three-for-eight rights issue | ||||
