Full year financial report for the 12 months ended 30th December 2018
|YEAR ENDING 31 DECEMBER||2018||2017||%|
|Underlying Earnings per share1 (continuing operations)||Cents||51.5||76.1||(32.3)|
|Earnings per share (continuing and discontinued operations)||Cents||55.1||76.2||(27.7)|
|Dividend per share||Cents||43.8||50.9||(13.9)|
|Cash flow from operations (continuing & discontinued)||$m||1,877.0||2,495.0||(24.8)|
|Net debt at period end(1)||$m||596.3||456.4||30.7|
|Average realised copper price||$/lb||2.81||3.00||(6.3)|
|Cash costs before by-product credits(1)||$/lb||1.72||1.60||7.5|
|Net cash costs(1)||$/lb||1.29||1.25||3.2|
Note: The financial results are prepared in accordance with IFRS, unless otherwise noted below.
(1) Non IFRS measures. Refer to the alternative performance measures in Note 28 to the preliminary results announcement
(2) Calculated as EBITDA/Group revenue. If Associates and JVs revenue is included EBITDA margin was 40.2 % in 2018 and 50.1% in 2017.
(3) On a cash basis
Revenue for the full year of $4,733.1 million was almost unchanged compared to 2017 reflecting the 6.3% decrease in the realised copper price, almost completely offset by higher copper sales volumes and higher molybdenum revenue
EBITDA(1) was $2,228 million, 13.9% lower than the previous year on flat revenue and as unit costs increased due to grade declines and higher input costs
EBITDA margin(2) was 47.1%.
Capital expenditure decreased to $873 million, $26.2 million lower than in 2017
Earnings per share from continuing operations of 51.5 cents per share, lower than in 2017 because of lower EBITDA and depreciation and amortisation 31% higher
Final dividend of 37.0 cents per share declared, bringing the total dividend for the year to 43.8 cents per share, which amounts to $432 million equal to a 65% pay-out ratio plus some $100 million of net cash proceeds from the sale of non-core assets during the year. This is similar to last year’s pay-out ratio of 67% and is in excess of the Company’s minimum pay-out policy of 35% of underlying earnings per share.
Safety is our top priority. As previously announced, there was a fatal accident at Los Pelambres involving a contractor employee in October 2018. A full investigation was completed and all actions have now been fully implemented.
Group copper production for the full year was 725,300 tonnes, 3% higher than 2017 and at the top end of revised guidance and set a record year for the Company due to higher production at Los Pelambres and Centinela
Group cash costs before by-product credits(1) for the full year were $1.72/lb, 12c/lb higher than last year due to the expected decline in grades at Centinela, and also increased costs at Los Pelambres, Antucoya and Zaldivar, as a result of higher input prices
Group net cash costs(1) for 2018 were $1.29/lb, 3.7% higher than in 2017, but below guidance reflecting higher than expected by-product revenues
Guidance (as previously announced)
Group production in 2019 is expected to be 750-790,000 tonnes of copper, 240-260,000 ounces of gold and 11,500-12,500 tonnes of molybdenum (as previously announced). Copper production is expected to grow as grades improve at all operations, but particularly Centinela Concentrates.
Group cash costs in 2019 before and after by-product credits are expected to be $1.70/lb and $1.30/lb respectively (as previously announced)
Cost savings of $100 million targeted under the Cost and Competitiveness Programme which have been included in the unit cost guidance figures
Capital expenditure for 2019 is estimated at $1.2 billion including expenditure carried over from 2018 and the Los Pelambres Expansion project.
Los Pelambres Incremental Expansion Phase 1 received approval at the end of 2018 with construction starting at the beginning of 2019. This phase will increase annual copper production by 40,000 tonnes in the first full year of the expansion, reaching 70,000 tonnes towards the end of the first 15 years. The capital cost of the project is $1.3 billion, which includes $500 million for a 400-litre per second desalination plant and water pipeline which has the capacity to supply the water requirements of this expansion, a potential future expansion and to serve as back-up for water supply to the existing plant in case of extended drought.
Centinela expansion. Following a detailed evaluation of two expansion alternatives the Company will progress the studies on a second concentrator, as this alternative offers the best potential combination of financial returns and risk profile. The feasibility study of the second concentrator is expected to be completed during 2020.
Antofagasta plc CEO Iván Arriagada said:
“2018 was a record year of production, with the Group hitting 725,300 tonnes of copper reflecting an improving level of operating stability and a full year’s contribution from Encuentro Oxides. This momentum will continue into 2019 which we expect to be another record-setting year as we benefit from a further improvement in grades and continued strong throughput.
“In 2018 we achieved savings of $184 million under our Cost and Competitiveness Programme which helped contain the increase in net cash costs to 3%. These savings were in excess of the $100 million originally targeted, and now for 2019 we are targeting a further $100 million of savings.
“Our financial results reflect the strong operating performance of the year. Despite lower realised copper prices EBITDA1 was in line with expectations at $2.2 billion with healthy operating cash flow of $1.9 billion.
“The Board has recommended a final dividend of 37 cents per share which, combined with the interim dividend amounts to $432 million. This includes some $100 million of net proceeds from the sale of non-core assets during the year and reflects the Company’s positive outlook and strong financial resources.
“As US/China trade negotiations have progressed during the first few months of this year the copper price has traded favourably. We expect price volatility to persist in the short term but consider the fundamentals of the copper market will remain positive and that the supply deficit will increase during the year.”
- Group copper production in 2019 is expected to benefit from improved grades as Centinela Concentrates mines a high grade zone, and to be in the range of 750-790,000 tonnes.
- The increase in production in 2019 comes mainly from Centinela and Zaldívar. The construction of the expansion project at Los Pelambres will impact the ore stockpile management at the concentrator and this has been factored into the mine’s previously released guidance figures.
- Group gold production for 2019 is expected to be in the range of 240-260,000 ounces, an increase of 15-25% on 2018, as grades increase at Centinela.
- Molybdenum production is expected to be in the range of 11,500-12,500 tonnes, 8-15% lower than in 2018 as grades drop at Los Pelambres, which is partially offset by an increase in production at Centinela with its molybdenum plant contributing up to 2,000 tonnes.
- Estimated net cash costs for 2019 of $1.30/lb include targeted savings from operational improvements from the Group’s Cost and Competitiveness Programme of some $100 million. These will compensate for expected upward pressure on costs from the increasing cost on some key consumables.
- Capital expenditure is expected to be $1.2 billion, which includes expenditure carried forward from 2018 and the Los Pelambres expansion project. Sustaining capital expenditure and mine development will remain at similar levels to 2018.
- The copper market was in slight deficit in 2018 and in 2019 the likelihood is that the deficit will increase as consumption growth remains positive and production growth constrained.