Sherritt International (S) Q2 2024 earnings summary

Executive summary

• Strong operational performance in Metals and Power segments, with higher production and sales volumes, improved cost structure, and production reliability, despite ongoing market headwinds and lower realized prices for nickel, cobalt, and fertilizers.

• Cost optimization initiatives, including workforce reductions and operational efficiencies, contributed to a 20% year-over-year decrease in Net Direct Cash Cost (NDCC) for nickel, reaching US$5.75/lb.

• Liquidity in Canada increased to $55.9 million at quarter-end, supported by Energas dividend distributions and full repayment of Moa JV advances.

• Strategic initiatives included workforce reductions, cost savings, and progress on expansion and process innovation projects.

Financial highlights

• Combined Q2 2024 revenue was $163.2 million, down 17% year-over-year; consolidated revenue was $51.4 million, down 45%.

• Adjusted EBITDA was $13.0 million, down 8% year-over-year.

• Net loss from continuing operations was $11.5 million (or $(0.03) per share); adjusted net loss was $10.0 million.

• Available liquidity in Canada at quarter-end was $55.9 million.

• Cash used by continuing operations was $(37.8) million, compared to $32.0 million provided in Q2 2023.

Outlook and guidance

• 2024 guidance for production volumes, unit operating costs/NDCC, and capital spending remains unchanged.

• Higher production and sales volumes expected in H2 2024, with NDCC and unit operating costs anticipated to remain within guidance ranges.

• Cobalt Swap distributions of ~$50 million expected in Q4 2024; Energas dividends in Canada projected to exceed $10 million for the year.

• Moa JV phase two expansion commissioning expected in 2025, with ramp-up in H1.