HIGHLIGHTS:
Group underlying EBITDA[1] of EUR 111 million for H1 2017, an increase of EUR 21 million on H1 2016, primarily due to a 50% increase in the average zinc price (USD 1,799/t to USD 2,690/t) and strengthening of the USD, partially offset by lower treatment charge terms and reduced production at Port Pirie
Metals Processing underlying EBITDA of EUR 117 million, up EUR 13 million year-on-year, driven primarily by higher commodity prices, partially offset by lower zinc treatment charges and reduced lead and by-product production; and
Substantially improved Mining underlying EBITDA of EUR 15 million, up EUR 14 million year-on-year, driven by higher commodity prices and lower treatment charges partially offset by negative EBITDA contribution from the restart of the Middle Tennessee Mines
Reinforced balance sheet
Net debt excluding zinc metal prepay and perpetual securities of EUR 986 million at the end of H1 2017, no change from 31 March 2017, predominantly due to USD 100 million of new silver prepays completed in Q2 2017 to roll forward prepays which are amortising in 2017. Net debt inclusive of zinc metal prepay and perpetual securities of EUR 1.243 billion at the end of H1 2017, a reduction of EUR 29 million on 31 March 2017
Successful placement of leverage neutral EUR 400m notes due 2024 in March 2017 and EUR 100m upsize of SCTF facility in April 2017 to enhance credit, extend maturities and improve liquidity
Further protective hedges placed for zinc price and foreign exchange to reduce downside risk
Port Pirie Redevelopment remains on schedule for hot commissioning to commence by the end of September 2017 with first feed of the new TSL furnace commencing in October 2017 and total project cost of approximately AUD 660 million
Middle Tennessee Mines restart and ramp-up ahead of schedule with zinc in concentrate production of 5kt in H1 2017; restart of Myra Falls approved by the board; and Latin American mining assets sold
Safety improvements across the group with the following milestones met - one million working hours recordable injury free at Auby, one million working hours lost time injury free at Port Pirie and no lost time injuries at the Middle Tennessee Mines restart
Strategic priorities remain to deliver the Port Pirie Redevelopment, optimise North American mining operations including the restart of Myra Falls and zinc smelting optimisation review
Commenting on the first half 2017 results, Hilmar Rode, Chief Executive Officer said:
"This was a solid half of production results for the zinc smelting and mining operations. Zinc metal production was a slight beat against the same period last year, even though production in Q2 2017 was impacted by a series of planned maintenance shuts at Balen, Budel and Hobart. Production of lead and by-products during H1 2017 was negatively impacted by unplanned outages at Port Pirie in Q1 2017 with issues at the old acid plant and blast furnace. These issues have now largely been resolved.
We have continued to progress our strategic initiatives in H1 2017, completing a review of our North American mining operations to identify their full potential and optimising the Port Pirie Redevelopment to accelerate and de-risk the project. We are pleased that the Port Pirie Redevelopment remains on track for hot commissioning by the end of September 2017. The review of our zinc smelting network to identify operating performance improvements is underway and we expect to have this largely completed in the current quarter.
The financial performance of the Company has been supported by the strong zinc market fundamentals which have provided zinc prices that are 50% higher than the same period last year. However, the Company still faces a number of headwinds in the form of a lower zinc benchmark treatment charge and the current weakening of the US dollar against the Euro. In this light, it is extremely important that we continue to progress against our clear set of strategic priorities to further strengthen and transform the business.
In H1 2017, our balance sheet has been substantially reinforced by the issuance of EUR 400 million of senior unsecured notes with a 7 year tenor in March 2017; the EUR 100 million upsize of the SCTF facility in April 2017 to EUR 500 million; and rolling our silver prepays with two additional silver prepay transactions completed in Q2 2017. These initiatives have significantly improved our liquidity to EUR 718 million and extended our average bond maturity to 4.25 years. During H1 2017, protective zinc price hedges have been put in place for 70% of Nyrstar's total free metal production through to the end of H1 2018 as well as protective foreign exchange hedges on CAD/USD and AUD/USD transactional exposure. We will continue to monitor the market for additional opportunistic financings and will apply strategic hedges to limit downside risks for key commodity price and foreign exchange sensitivities on a rolling six to nine month basis during the implementation of the Company's transformation and turnaround plan.
The strategic priorities for the second half of the year and into 2018 will be to deliver the Port Pirie Redevelopment and start the ramp up to design capacity; complete the full potential review of our zinc smelting network; and begin to deliver a substantial earnings uplift from the North American mining operations with the optimisation of the Tennessee and Langlois operations and the restart of the Myra Falls mine."
CONFERENCE CALL
Management will discuss this statement in a conference call with the investment community on 2 August 2017 at 9:00am Central European Summer Time. The presentation will be webcast live and will also be available in archive. The webcast can be accessed via http://edge.media-server.com/m/p/vvqd85os.
KEY FIGURES
EUR million (unless otherwise indicated)
H1
H1
%
2016
2017
Change
Income Statement Summary
Revenue
1,321
1,806
37%
Gross Profit
472
555
18%
Direct operating costs
(385)
(445)
16%
Non-operating and other
3
2
(33%)
Underlying EBITDA
Metals Processing Underlying EBITDA
104
117
13%
Mining Underlying EBITDA
1
15
1400%
Other and Eliminations Underlying EBITDA
(15)
(22)
47%
Group Underlying EBITDA
90
111
23%
Underlying EBITDA margin
7%
6%
(14%)
Embedded derivatives
(4)
(2)
(50%)
Restructuring expense
(1)
(1)
0%
M&A related transaction expense
(1)
0
(100%)
Result on the disposal of subsidiaries
(0)
(2)
100%
Other income
-
7
100%
Underlying adjustments
(6)
2
(133%)
Depreciation, depletion, amortisation
(87)
(77)
(11%)
Impairment loss
(58)
-
(100%)
Net finance expense
(53)
(65)
23%
Net foreign exchange (loss)/gain
(4)
(35)
775%
Income tax (expense) / benefit
(23)
9
(139%)
Profit / (Loss) from continuing operations
(142)
(56)
(61%)
Profit / (Loss) from discontinued operations
(100)
35
(135%)
Profit / (Loss) for the period
(242)
(21)
(91%)
Basic Loss per share (EUR)
(2.98)
(0.22)
(93%)
Capex
Metals Processing
118
140
19%
Mining
6
19
217%
Group Capex
125
161
29%
Cash Flow
Cash flow from operating activities before working capital changes
54
89
65%
Working capital and other changes
(69)
19
(128%)
31 Dec 2016
30 Jun 2017
Loans and borrowings, end of the period
992
1,081
9%
Zinc Prepay
170
118
(31%)
Perpetual Securities
132
139
5%
Cash and cash equivalents, end of period
(127)
(95)
(25%)
Net Debt Exclusive of Zinc Prepay and Perpetual Securities
865
986
14%
Net Debt Inclusive of Zinc Prepay and Perpetual Securities
1,167
1,243
7%
EUR million
(unless otherwise indicated) [2]
H1
H1
%
2016
2017
Change
Metals Processing Production
Zinc metal ('000 tonnes)
507
518
2%
Lead metal ('000 tonnes)
95
84
(12%)
Mining Production
Zinc in concentrate ('000 tonnes)
50
53
6%
Market[3]
Zinc price (USD/t)
1,799
2,690
50%
Lead price (USD/t)
1,731
2,221
28%
Silver price (USD/t.oz)
15.82
17.32
9%
Gold price (USD/t.oz)
1,221
1,238
1%
EUR/USD average exchange rate
1.12
1.08
(4%)
EUR/AUD average exchange rate
1.52
1.44
(5%)
GROUP FINANCIAL OVERVIEW
Revenue for H1 2017 of EUR 1,806 million was up 37% on H1 2016, driven by higher zinc, lead, silver and gold prices which were up 50%, 28%, 9% and 1% respectively, benefit of stronger US dollar against Euro in H1 2017 versus H1 2016 and increased production volumes in zinc smelting and mining.
Group gross profit for H1 2017 of EUR 555 million was up 18% on H1 2016, driven by higher production volumes in both Metals Processing and Mining and higher zinc, lead, silver and gold prices and stronger US dollar, partially offset by deteriorating benchmark zinc treatment charge terms.
Direct operating costs for H1 2017 of EUR 445 million increased 16% on H1 2016, due to higher production volumes in both Metals Processing and Mining and higher mining costs as a result of the restart of mining operations at Middle Tennessee.
Group underlying EBITDA (continuing operations) of EUR 111 million in H1 2017, an increase of 23% on H1 2016, due to higher commodity prices and stronger US dollar, partially offset by lower treatment charges and lower production from Port Pirie.
Depreciation, depletion and amortisation expense for H1 2017 of EUR 77 million was down 11% year-on year, largely driven by the mining impairment charges taken in 2016.
Net finance expense including foreign exchange for H1 2017 of EUR 65 million was up EUR 12 million on H1 2016 primarily due to net debt exclusive of zinc prepay and perpetual securities increasing by 14% and net debt inclusive of zinc prepay and perpetual securities increasing by 7% compared to end December 2016. During H1 2017, perpetual securities were drawn by only EUR 7 million as Nyrstar needed to fund the capital expenditure overrun at Port Pirie, communicated in February 2017, before drawing further perpetual securities. At the end of H1 2017, an aggregate total net of debt issue costs of EUR 139 million (AUD 219 million) of perpetual securities had been drawn for the Port Pirie Redevelopment funding.
Income tax benefit (including discontinued operations) for H1 2017 of EUR 9 million (H1 2016: income tax expense of EUR 23 million from continuing operations and EUR 6 million from discontinued operations) due to recognition of losses, representing an effective tax rate of 29.4% (H1 2016: (13.9%)). The effective tax rate for H1 2017 was impacted by losses incurred by Nyrstar, including the discontinued operations, for which no tax benefit has been recognised.
Loss from continuing operations in H1 2017 of EUR 56 million, compared to a net loss of EUR 142 million in H1 2016, mainly as a result of the impairment charges related to Mining assets in H1 2016.
Capital expenditure (continuing operations) was EUR 161 million in H1 2017, representing an increase of 29% year-on-year driven by a EUR 22 million increase in Metals Processing due to the large planned maintenance shuts in Q2 2017 at Budel, Balen and Hobart and EUR 13 million capex increase in Mining with the restart of the Middle Tennessee mines, compared to H1 2016 at EUR 125 million.
Cash flow from operating activities before working capital changes of EUR 89 million in H1 2017 was up 65% compared to EUR 54 million in H1 2016 and cash in-flow from changes in working capital and other balance sheet movements in H1 2017 of EUR 19 million was up 128% compared to an out-flow of EUR 69 million in H1 2016, resulting in total cash in-flow from operating activities for H1 2017 of EUR 108 million compared to EUR 15 million outflow for H1 2016. The increase in net working capital levels was driven primarily by an increase in inventory valuation due to higher commodity prices, including the effect on inventory balance from zinc price increases of approximately EUR 46 million for H1 2017.
Net debt at the end of H1 2017, excluding the zinc metal prepay and perpetual securities, was 14% higher compared to the end of 2016 at EUR 986 million (EUR 865 million at the end of 2016). The net debt inclusive of the zinc metal prepay and perpetual securities at the end of H1 2017 was EUR 1,243 million, up 7% compared to the end of 2016. Cash balance at the end of H1 2017 was EUR 95 million compared to EUR 127 million at the end of 2016 with proforma liquidity at the end of H1 2017 of EUR 718 million which includes the upsize of the Structured Commodity Trade Finance Facility completed at the end of April 2017.
ZINC CONCENTRATES
Zinc concentrate 2017 benchmark treatment charges were settled at the end of Q1 2017 on the following terms:
- Base TC USD 172 per dmt (dry metric tonne) of concentrate at basis price of USD 2,800 per tonne;
- Escalator of 0% from zinc price above USD 2,800 per tonne; and
- De-escalator of 0% from zinc price below USD 2,800 per tonne.
Nyrstar concluded its negotiations with all benchmark and non-benchmark suppliers by April 2017. The 2017 benchmark zinc concentrate treatment charge represents a base TC decrease of approximately 15% on the 2016 headline treatment charge of USD 203 per dmt, basis price USD 2,000 per tonne.
The vast majority (90-95%) of Nyrstar's concentrate requirements for 2017 are priced at benchmark terms or by reference to the benchmark with a discount applied. The average discount to the benchmark realized by Nyrstar in H1 2017 has been slightly larger than in H1 2016 and the past several years. In H1 2017, the average discount to the realized zinc treatment charge achieved by Nyrstar's Metals Processing operations was approximately USD 40-50 per tonne and was in-line with the discount realized in Q2 to Q4 2016. The same discount is expected to be realized over the course of H2 2017.
SAFETY, HEALTH AND ENVIRONMENT
"Prevent Harm" is a core priority of Nyrstar. The Company is committed to maintaining safe operations and to proactively managing risks including with respect to people and the environment. At Nyrstar, we work together to create a workplace where all risks are effectively identified and controlled and everyone goes home safe and healthy each day of their working life.
The lost time injury rate (LTIR) for the Company in H1 2017 was 1.8, similar to the rate of 1.7 in H1 2016. The frequency rate of cases with time lost or under restricted duties (DART) and the frequency rate of cases requiring at least a medical treatment (RIR) declined by 11% and 3% compared to H1 2016.
Nyrstar achieved a number of significant safety milestones in H1 of 2017. These milestones included the Auby smelter reaching one million working hours recordable injury free (the first time at Nyrstar that an operational site achieved such a milestone); the Port Pirie Redevelopment project completed one million working hours lost time injury free; and the Middle Tennessee Mines were restarted with no lost time injuries.
No environmental events with material business consequences or long-term environmental impacts occurred during H1 2017.
For further information please visit the Nyrstar website: www.nyrstar.com
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