Nexa Resources (NEXA) Q4 2019 earnings summary

Executive summary

• 2019 net revenue was US$2.3B and adjusted EBITDA US$349M; lower metal prices drove weaker results, with a US$159M net loss after a US$142M non-cash Cerro Pasco impairment.

• Zinc-equivalent production reached 564kt, down 1.9% YoY; Aripuanã construction began and the operational transformation program targeted efficiency gains.

Financial highlights

• Net revenue fell 6% to US$2.332B from US$2.491B in 2018, as lower LME prices more than offset higher metal sales volumes.

• Net loss was US$159M vs net income of US$91M in 2018, including a US$142M non-cash impairment tied to Cerro Pasco.

• Adjusted EBITDA was US$349M, with a 15% margin, vs US$605M and 24.3% in 2018; excluding non-recurring expenses in both periods, EBITDA was US$402M, down 30% YoY.

• Cost of sales rose 3% to US$1.8B, reflecting higher mine operating costs, partly offset by lower raw-material costs and better smelter recovery.

Outlook and guidance

• The Nexa Way initiatives are expected to deliver US$120M of annualized EBITDA improvements during 2020–21, at ~US$41M of non-recurring costs included in 2019 G&A.

• Aripuanã was expected to start operations in 2021; stabilization in 2022–23 is expected to support mine-smelter integration and reduce reliance on purchased zinc concentrate.

• Aripuanã investment was estimated at ~US$220M for 2020; the report’s 2020 expectations excluded unpredictable COVID-19 effects and noted uncertainty around operational impacts.

• Bonsucesso feasibility work was expected to finish in 2020, with construction planned for 2021 subject to environmental licenses.