Nexa Resources (NEXA) Q4 2018 earnings summary

Executive summary

• 2018 net revenue reached $2.491bn, up 1.7% YoY; adjusted EBITDA was $604.8m, down 9.4%, amid higher mining costs and lower copper grades.

• Zinc-equivalent production totaled 556kt, down 3% YoY; smelter product sales rose 4% to 617kt.

• Strategic priorities centered on zinc and copper growth in the Americas, operational excellence, mine-life extension, and the Aripuanã project, with production targeted to begin in 2021.

Financial highlights

• Net revenue was $2,491.2m versus $2,449.5m in 2017, supported by slightly higher LME prices and metal sales.

• Adjusted EBITDA was $604.8m versus $667.5m; higher safety and mine-development costs, mainly at Cerro Lindo, weighed on results.

• Cost of sales rose 7.8% to $1,888.9m, reflecting higher concentrate-purchase costs in H1; SG&A increased 3.3% to $159.6m.

• Net profit was $91.0m in 2018, as reported in value-added distribution; operating cash flow was $347.6m.

Outlook and guidance

• 2019 Capex is expected to increase versus 2018, including an estimated $140m for Aripuanã, equal to 35% of its estimated $392m total investment.

• Aripuanã construction was planned to begin in Q1 2019, with operations expected in 2021; planned capacity is 2.3Mt of ore annually and 120kt of zinc equivalent annually.

• Cajamarquilla’s jarosite project is expected to complete in Q3 2019, increasing nominal zinc capacity from 330kt to 340kt annually; investment is estimated at $45m.

• Strategic targets include 75% water recirculation and a 5% reduction in GHG emissions per tonne of product by 2025.