Macquarie has shifted its recommendation for Sandfire Resources (SFRRF, Financial) from Outperform to Neutral, setting a target price of A$10.90. This change in outlook follows the release of the company's third-quarter report. The firm has also reduced its earnings per share estimate for the fiscal year 2025 by 4%. The adjustment comes as a result of strong performance in the stock's share price, which Macquarie now considers to be fully valued.
SFRRF Key Business Developments
Release Date: February 20, 2025
- Group Copper Equivalent Production: Increased by 16% to 75,100 tonnes.
- Revenue: Increased by 37%.
- Underlying EBITDA: Increased by 87% to $255 million.
- EBITDA Margin: 45%.
- Underlying Profit: $49 million.
- Statutory Profit: $50 million.
- Net Debt: Declined by 27% to $288 million.
- Motheo EBITDA Margin: Increased by 17% to 60% or $159.7 million.
- Motheo Operating Unit Cost: $37 per tonne, 4% below initial guidance.
- MATSA EBITDA Margin: Increased by 3% to 44% or $134 million.
- MATSA Operating Unit Cost: $76 per tonne, within 1% of full-year guidance.
- Depreciation and Amortization (D&A) Expense: $153 million, including $35 million for Motheo.
- Underlying Net Finance Expense: $27 million.
- Underlying Income Tax Expense: Increased to $25 million.
- Capital Expenditure: $98 million, consistent with the prior period.
- New Corporate Revolver Facility: $650 million, expected to be executed by March 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sandfire Resources Ltd (SFRRF, Financial) achieved a 16% increase in group copper equivalent production to 75,100 tonnes, keeping them on track to meet annual production guidance.
- The company reported an 87% increase in underlying EBITDA to $255 million, resulting in a healthy EBITDA margin of 45%.
- Net debt declined by 27% during the half to $288 million, demonstrating strong cash-generating capabilities and progress towards a net cash position.
- The company successfully reduced annual cost guidance for Motheo by 7% to $39 per tonne of ore processed.
- Sandfire Resources Ltd (SFRRF) received mining authority approval for a new tailings facility at MATSA, supporting mining operations beyond 2040.
Negative Points
- Heavy rainfall poses emerging risks at both MATSA and Motheo operations, potentially impacting production if conditions persist.
- No interim dividend was declared for the first half of FY25 as the company prioritizes deleveraging its balance sheet.
- The company's underlying income tax expense increased to $25 million due to profitability, with limited ability to recognize tax benefits in Australia and the USA.
- MATSA experienced operational challenges due to heavy rainfall, including wet ROM stockpiles affecting crushing and processing operations.
- The refinancing of debt facilities will trigger a noncash interest expense of approximately $11 million in the second half of FY25.
