Newcrest Mining Ltd. (ASX:NCM, Financial) released the financial results for full-fiscal 2017 Monday.
The Australian precious metal mining company already informed the market about its fourth-quarter and full-fiscal 2017 operating results on July 24.
You can read the figures on the operating results in my previous article on Newcrest Mining.
The Australian miner closed full-fiscal 2017 showing a net profit of $394 million. This represents a 22% increase from the bottom line of the previous year when Newcrest Mining reported a net profit of $323 million.
The profit for full-fiscal 2017 was backed by revenue that came in at $3.477 billion, a 6% upside year over year. In full-fiscal 2016 the miner reported a revenue of $3.295 billion.
Revenue for the year ended June 30 is shared as follows:
- For the sale of gold Newcrest Mining’s customers were invoiced for a total of $3.001 billion, a 5% increase year over year.
- The revenue coming in from the sale of copper was $456 million. This was 13% higher than copper revenue of the prior year.
- From the sale of silver, Newcrest Mining made revenue of $20 million versus $35 million reported by the miner for full-fiscal 2016.
The increase in year-over-year revenue is mainly attributable to the increase in the gold margin (gold price per ounce minus AISC per ounce of the metal sold) by 17.8% from $404.07 in 2016 to $476 in 2017. This was possible thanks to a higher average gold price the miner realized from the sale of one ounce on a year-over-year basis (up 8.3%; from $1,166.205 in 2016 to $1,263 in 2017), even though the all-in sustaining cost (AISC) per ounce of the yellow metal sold increased by 3.3% year over year to $787 due to operating issues at its mines that impacted on the fourth quarter and the full-year gold production.
The sale of the yellow metal contributed 86% to Newcrest Mining’s total revenue for full-fiscal 2017 while the sale of copper contributed 13.11%.
The higher gold price realized by the miner on average from the sale of the yellow metal and the increase in the production of copper enabled the miner to reduce the net debt by 29% from $2.1 billion in 2016 to $1.5 billion in 2017. Because of the factors mentioned before, the operating cash flow increased by 18% from $1.241 billion in 2016 to $1.467 billion in 2017. Due to a 70% increase year over year in the amount of funds used as capex, the free cash flow generated by Newcrest Mining declined 9% to $739 million in 2017. The increase in capex was probably a consequence of Newcrest Mining’s efforts to bring Cadia back to normal after the disruption to the company's asset in the Australian state of New South Wales due to the seismic event that occurred on April 14.
Part of the free cash flow was used by Newcrest Mining to further deleverage the business through a nearly 30% reduction in the net debt. This amounted to $1.5 billion on June 30. Financial performance of full-fiscal 2017 has contributed to strengthening Newcrest Mining’s balance sheet that as of fourth-quarter 2017 lies on $492 million in cash on hand and securities, an impressive 828% increase year over year. The company has plenty of cash to invest for the upgrading of its property, plant and equipment that as of the fourth quarter has a value of $8.852 billion, flat year over year. Noncash charges due to depreciation and amortization was $671 million in 2017, a 1% increase from 2016.
The interest coverage ratio, which measures Newcrest Mining’s ability in paying interest expenses on the outstanding debt, is 13.6 for 2017 versus a ratio of 11.3 for 2016 and versus an industry average of -0.88.
The free cash flow is also used by the Australian miner to pay dividends to its shareholders. The company will distribute 7.5 cents per share to its shareholders in the form of dividend payable on Oct. 27.
The company says that “going forward Newcrest is targeting a total dividend payout of at least 10% to 30% of free cash flow generated for that financial year, with the dividend being no less than 15 cents per share on a full-year basis.” A yearly dividend of 15 cents leads to a yield of approximately 0.88% according to the current share price of 21.62 Australian dollars (or about $13.46).
Newcrest Mining's share price is down 23 cents or 1.05% from the previous trading day with a market capitalization of 16.566 billion Australian dollars, a price-book (P/B) ratio of 2.30, a price-sales (P/S) ratio of 4.66, a price-earnings (P/E) ratio of 38.06 and an EV/EBITDA ratio of 13.73. The net debt-EBITDA ratio improved by 31% from 1.6 in 2016 to 1.1 in 2017.
The average analyst target price is 17.41 Australian dollars per share, which ranges between a low of 10.75 Australian dollars and a high of 24 Australian dollars. The recommendation rating is 3.1 out of 5. The current target price represents a 19.5% downside in the current market value per share.
Disclosure: I have no position in Newcrest Mining.
