Nexa Resources (NEXA) Q4 2017 earnings summary

Executive summary

• 2017 net revenue rose 24.7% to US$2,449.5 million and adjusted EBITDA increased 65.3% to US$667.5 million, despite lower production volumes and severe first-quarter rain disruptions in Peru.

• The October IPO on the NYSE and TSX raised US$570 million; strategic priorities remained growth, operational excellence and market development.

Financial highlights

• Net revenue was US$2,449.5 million, up 24.7% YoY; higher metal prices supported growth, partly offset by lower production volumes.

• Adjusted EBITDA reached US$667.5 million, up 65.3% YoY; adjusted EBITDA margin was 27.3%, versus 20.6% in 2016.

• Cost of goods sold rose 16.8% to US$1,681.2 million; SG&A increased 9.0% to US$237.5 million.

• Operating cash flow was US$379 million, down 35.2% from US$585 million in 2016, reflecting the silver-streaming arrangement and other cash movements.

Outlook and guidance

• Strategy targets 15 years of mineral resources from current operations, including five years in reserves; priorities include mine-life extensions, greenfield projects and cost control.

• Aripuanã operations were anticipated to start in 2020; Vazante mine-life extension targets operation through 2027, with project completion expected in 2023.

• The Cajamarquilla jarosite conversion was expected to complete in September 2019, raising zinc recovery from 93.8% to 97.0%.

• 2018 priorities included customer proximity, logistics system implementation and continued investment in operational excellence, automation and safety.