Sherritt International (S) Q2 2024 earnings summary

Executive summary

• Metals and Power segments delivered strong operational improvements and cost reductions, with NDCC for nickel dropping to US$5.75/lb—a 20% year-over-year and 21% sequential improvement—despite ongoing market headwinds and lower realized prices for nickel, cobalt, and fertilizers.

• Higher production and sales volumes in both segments supported financial metrics, with Power segment achieving increased dividends from Energas.

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

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

• Net loss from continuing operations was $11.5 million ($0.03/share), mainly due to lower realized prices, partially offset by higher nickel sales volumes.

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.

• Cash used by continuing operations was $(37.8) million in Q2 2024, compared to $32.0 million provided in Q2 2023.

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

Outlook and guidance

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

• NDCC guidance for 2024 is maintained at US$5.50–6.00/lb.

• Cobalt Swap distributions from the Moa JV are expected to commence in Q4 2024, with anticipated receipts of ~$50 million for the year.

• Dividends from Energas in Canada are expected to exceed $10 million in 2024.

• Moa JV phase two expansion commissioning expected in H1 2025.