Regulated Information
25 July 2013
HIGHLIGHTS
Challenging trading environment with downward movements in base and precious metal prices during H1 2013; strategic price hedges put in place for H2 2013
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Average zinc price in H1 2013 slightly up on H2 2012 (USD 1,937/t compared to USD 1,916/t) due to strong start to year; however, since March the price has traded between USD 1,800 - 1,900/t
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Average silver and gold prices declined by 15% and 10% respectively compared to H2 2012, impacting mining C1 cash costs and to a lesser extent Metals Processing by-product gross profit
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Entered into strategic price hedges for zinc, and subsequently gold and silver, for H2 2013
Own production impacted by planned maintenance shuts and operational events
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Zinc metal production at smelters of 519kt, down 5% on H2 2012, in line with guidance given planned maintenance shuts; full year guidance maintained
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Own mine zinc in concentrate production (excluding Talvivaara deliveries) of 138kt, 6% down on H2 2012
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Talvivaara deliveries of 7kt, down 50% on H2 2012
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Lead and copper in concentrate production in line with guidance; silver production impacted by Campo Morado suspension and gold volumes down 52% with deferral of gold production at El Toqui to H2 2013 as site constructs facility to produce high margin gold dor�
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Mining full year production guidance maintained for all metals other than gold
Group underlying EBITDA and PAT adversely impacted by lower volumes and macro-economic conditions
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Group underlying EBITDA of EUR 87 million, down 20% on H2 2012 (EUR 109 million)
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Mining EUR 33 million, down 55%, due to impact of declining metal prices on financial performance and operational events
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Metals Processing EUR 74 million, up 32%, with recognition of the termination fee for the commodity grade metal off-take agreement more than offsetting the impact of planned maintenance shuts
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EPS of EUR (0.58) (PAT EUR (92) million, compared to EUR (63) million in H2 2012)
Solid financial position; high quality portfolio of long-term debt with limited covenants
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Increase in net debt to EUR 756 million at end of H1 2013 (EUR 681 million at end of H2 2012)
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Cash inflow from operations of EUR 94 million due to working capital improvements
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Continued to deliver cost savings through Project Lean (group-wide cost reduction programme) in H1 2013; identified EUR 75 million (up from EUR 50 million) of incremental annualised sustainable savings to be realised by end of 2014
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Capital expenditure EUR 112 million in H1 2013; maintain full year guidance of EUR 200 - 230 million
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Capital distribution of EUR 0.16 per share to occur on 14 August 2013; reflects continued confidence in strategy
New organisation structure more aligned with Company's growing metals and mining business
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Created three distinct business segments: Mining, Metals Processing and Marketing, Sourcing & Sales
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Each business segment represented on Nyrstar's management committee by newly created Senior Vice President positions
Commenting on the 2013 half year results, Roland Junck, Chief Executive Officer of Nyrstar, said:
"Following a strong start to the year, base metals prices declined sharply in March with the zinc price trading between USD 1,800 to USD 1,900/t for the majority of the second quarter. We took advantage of the higher zinc price environment at the start of the year and entered into zinc price hedges for a portion of our 2013 production. Gold and silver prices also deteriorated significantly during the first half, and given our increasing sensitivity to these metals over recent years, this had a negative impact on earnings in H1 2013. We have, however, managed to partially reduce the impact of a sustained low gold and silver price environment continuing into H2 2013 by entering into gold and silver price hedges for a portion of our remaining 2013 precious metals production.
In the mining segment we delivered a strong performance at the Tennessee Mines, which achieved record half year zinc in concentrate production. However, as previously announced, mining operations were temporarily suspended at the Campo Morado mine during February and March which had a significant impact on the site's Q1 operational and financial performance. The site recommenced production in early April and was fully operational during Q2 2013. Also, as previously announced the El Toqui mine switched its focus to zinc production and deferred gold production to H2 2013 while it constructs a facility to produce high margin gold dor�. This had a significant impact on the site's financial performance half on half. Far lower deliveries from Talvivaara in H1 2013 compared to previous half years, also adversely impacted earnings. In the Metals Processing segment operational performance was in line with management expectations given the planned maintenance shuts.
As a consequence of the unfavourable metal price environment and these operational events, our financial performance declined in H1 2013 with group underlying EBITDA of EUR 87 million, down 20% compared to H2 2012. Restructuring expenses related to Project Lean, our programme to sustainably reduce group-wide operating costs, and our organisational restructure, in addition to one-off impairment charges against equity investments, also contributed to a loss after tax result of EUR (92) million in H1 2013.
We remain in a solid financial position despite the decline in profitability. We generated a cash inflow from operations due to improvements in working capital, although net debt increased due to lower earnings. Our portfolio of debt remains of a high quality and is long-dated, with only limited covenants on our undrawn commodity trade finance facility. To reflect the continued confidence in the company and its strategy, the Nyrstar board proposed a distribution of EUR 0.16 per share which was approved by an EGM, with a payment date of 14 August 2013.
During the first half of 2013 we continued to take a number of important strategic steps to ensure our growth in the medium to long term, in addition to strengthening our business in the short term. We restructured our organisation to create three distinct business segments: Mining, Metals Processing (formerly the Smelting segment) and Marketing, Sourcing & Sales. Each segment is represented by newly created roles on the Management Committee, creating direct lines of sight for each of these core business value drivers to ensure continued focus on driving operational improvement and financial performance. We also agreed to end the European part of our commodity grade metal off-take agreement by the end of 2013, presenting a unique opportunity for our newly created Marketing, Sourcing & Sales segment to potentially tender the volume, enter into partnering arrangements or bring the volumes back in-house.
Looking forward to H2 2013 we will continue to seek improvements in the performance of our assets, through a number of on-going initiatives such as Project Lean, and will seek additional margins from our new Marketing, Sourcing & Sales segment. Nyrstar is confident that the new organisational structure will provide the additional focus to make this happen. We have previously spoken of the likelihood of continued short term volatility in commodity markets, with conditions in H1 2013 evidence of this, and if this continues into H2 2013 our earnings will continue to be adversely impacted. Having said that we remain confident in the medium and long term fundamentals of zinc and other related commodity markets. We continue to explore value accretive M&A and strategic internal growth opportunities, through the transformation of Port Pirie and the Strategic Review of the Metals Processing segment, and will ensure our balance sheet continues to support our growth strategy."
CONFERENCE CALL
Management will discuss this statement in a conference call with the investment community on 25 July 2013 at 09:00am Central European Time. The presentation will be webcast live on the Nyrstar website, www.nyrstar.com, and will also be available in archive.
FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements that reflect Nyrstar's intentions, beliefs or current expectations concerning, among other things: Nyrstar's results of operations, financial condition, liquidity, performance, prospects, growth, strategies and the industry in which Nyrstar operates. These forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause Nyrstar's actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Nyrstar cautions you that forward-looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which Nyrstar operates may differ materially from those made in or suggested by the forward-looking statements contained in this news release. In addition, even if Nyrstar's results of operations, financial condition, liquidity and growth and the development of the industry in which Nyrstar operates are consistent with the forward-looking statements contained in this news release, those results or developments may not be indicative of results or developments in future periods. Nyrstar and each of its directors, officers and employees expressly disclaim any obligation or undertaking to review, update or release any update of or revisions to any forward-looking statements in this report or any change in Nyrstar's expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.
About Nyrstar
Nyrstar is an integrated mining and metals business, with market leading positions in zinc and lead, and growing positions in other base and precious metals; essential resources that are fuelling the rapid urbanisation and industrialisation of our changing world. Nyrstar has mining, smelting, and other operations located in Europe, the Americas, China and Australia and employs over 7,000 people. Nyrstar is incorporated in Belgium and has its corporate office in Switzerland. Nyrstar is listed on NYSE Euronext Brussels under the symbol NYR. For further information please visit the Nyrstar website, www.nyrstar.com
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