Antofagasta : 2018 Half Year Financial Report

Antofagasta plc CEO Iván Arriagada said: 'As we have guided, this year is a tale of two halves. The first half, on which we are reporting, is expectedly softer due to lower sales tonnes and grades and higher costs, but we are expecting tonnages and unit costs to improve substantially during the second half and well into 2019 as mined grades increase in line with our mine plan. Our confidence in achieving this is underpinned by the reiteration of our previously stated copper production guidance and net cash cost guidance for the full year of 705-740,000 tonnes at $1.35/lb.

'With Antofagasta's strategy focused on producing profitable tonnes, the successful Cost and Competitiveness Programme has yielded a 7c/lb cost saving in the first half and together with the Operating Excellence Programme these programmes are delivering immediate benefits. We expect this performance to continue as we focus on innovative ways of improving costs and safety.

'Regardless of external factors such as prices, inflation and foreign exchange movements, Antofagasta is well positioned for growth, generating strong cash flow and improving returns. The outlook is positive - we have the assets, capabilities and the capital allocation strategy as well as the discipline to continue to deliver long-term value for all our stakeholders.'

Financial performance

• Revenue up 3.6% to $2,120.7 million as higher realised prices offset lower copper sales volumes
• EBITDA(1) for the first six months of the year was $904.2 million, 16.2% lower than the $1,078.9 million in the previous year
• EBITDA margin of 42.6%, down from 52.7% during same period last year as unit production costs increased
• Cost and Competitiveness Programme achieved savings of $54 million in the first half of 2018, equivalent to 7c/lb
• Profit before tax from continuing operations for the period decreased by 32.4% to $465.6 million
• Cash flow from continuing and discontinued operations of $890.4 million, down 22.4% compared to the same period last year due to lower margins
• Capital expenditure of $422.0 million, 42% of unchanged full year guidance
• Net debt increased by $320.7 million from the end of 2017 to $781.2 million, representing a Net Debt to EBITDA ratio of 0.32 times on lower cash flow from operations and after the payment of the 2017 final dividend and increased taxes.
• Earnings per share from continuing operations of 19.6 cents per share, a 33.3% decrease on 2017
• Interim dividend of 6.8 cents per share, equivalent to a payout ratio of 35% of net earnings(1) from continuing operations

Operating performance

• The Group continued its period with zero fatalities,which started in April 2016
• Group copper production is 8.5% lower at 317,000 tonnes, due primarily to lower grades at Centinela and the pipeline blockage at Los Pelambres
• Group cash costs before by-product credits⁽¹⁾ for the half year were $1.92/lb, up from $1.56/lb in the same period last year due to lower production, higher input prices and a stronger Chilean Peso 1

• Group net cash costs⁽¹⁾ were $1.52/lb, an increase of 22.6% from $1.24/lb in the same period in 2017, on higher cash costs before by-product credits partially offset by higher by-product revenues

Outlook

• Group copper production and net cash cost guidance for the full year is unchanged at 705-740,000 tonnes at $1.35/lb as grades continue to improve over the rest of the year. This assumes the Chilean Peso exchange rate and molybdenum price remain at current levels.
• Capital expenditure guidance for the full year is also unchanged at $1.0 billion

Other

• Labour negotiations were successfully concluded at Los Pelambres in the first quarter. The Group's next labour negotiations are scheduled to be completed by August 2019
• Zaldívar submitted an Environmental Impact Assessment to extend the company's water extraction permit from current sources beyond 2025 in line with its existing life of mine
• As part of the Group's disposal of non-core assets, Centinela announced the sale of its electricity transmission lines for $117 million

Note: The financial results are for continuing operations and are prepared in accordance with IFRS, unless otherwise noted below.

(1) Non-IFRS measures. Net earnings represent profit for the period attributable to the owners of the parent. Refer to the alternative performance measures in Note 22 to the half-year financial report below.

(2) Calculated as EBITDA/Revenue. If Associates and JVs' revenue is included EBITDA Margin was 39.3% in HY 2018 and 48.3% in HY 2017.

(3) From continuing and discontinued operations.

(4) Excludes 20,600 tonnes of sales by Zaldívar in HY 2018 and 24,300 tonnes in HY 2017.

Download PDF (1MB)