Key points
- Average realised gold price down 9% to A$1,408 per ounce. In US dollars, the average realised gold price was down 18% to $US1,292 per ounce
- Gold production up 14% to 2.396m ounces and gold sales up 17% to 2.405m ounces
- Sales revenue up 7% to $4,040m
- EBITDA up 3% to $1,514m
- EBIT up 10% to $821m
- Statutory loss of $2,221m (compared to a $5,783m loss in the prior year) and underlying profit down 3% to $432m
- Free cash flow (cash flow from operations – cash flow from investing activities) was an inflow of $133m compared to a net outflow of $1,417m in the prior year, with all operations free cash flow positive except for Hidden Valley
- All-in sustaining cost down 24% to A$976 per ounce
- Total debt down 3% to $4,076m, net debt down 5% to $3,935m.
- Debt / EBITDA down from 2.9x to 2.7x
- Gearing ratio (net debt / net debt + equity) up from 29.3% to 33.8%
- Gross finance costs up $37m to $182m, due to FX movements and a higher level of average debt during the year
- $1,808m in cash and undrawn committed facilities
Newcrest Mining has reported an improved operating performance in FY14 which is moderately positive for bond holders. The result reflects productivity improvements and cost reductions which enabled the company to maintain its underlying profit and profit margins despite a lower gold price, delivering free cash flow of $133m for the year. Newcrest’s 2014 financial year gold production of 2.4m ounces exceeded guidance of 2.0m to 2.3m ounces.
The current year underlying profit for Newcrest reflects adverse factors including a 9% decline in average realised gold price and higher interest costs (due to higher average debt levels and lower capitalised interest). These unfavourable impacts were largely offset by increased gold production and sales volumes, with the depreciation in the Australian dollar against the US dollar also providing some cushioning against the lower gold price. Significant items represented a net loss after tax of $2,653m, due primarily to previously-announced asset impairments of $2,353m (range of $1.5bn - $2.5bn was expected).
On balance, the Newcrest results are moderately positive from a credit perspective despite the significant statutory loss which was driven by a large non-cash write down in assets. Of particular note is the turn-around in free cash flow to a positive position in line with the company’s stated aim of focussing on free cash flow generation, production levels coming out higher than guidance, a moderate improvement in the Debt / EBITDA ratio, offset by an increase in the gearing ratio.
FIIG currently has good levels of supply in the Newcrest fixed rate US dollar bonds maturing in November 2021 and October 2022, offering yields to maturity of 4.25%p.a. and 4.57%p.a. respectively, combined with an exposure to US dollar returns. Please contact your FIIG representative if you are interested in investing in the Newcrest bonds.
All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities.