Antofagasta lowers 2013 dividend as falling metal prices hurt revenue - UPDATE

18th Mar 2014 07:06

- Dividend lowered by 3.5 per cent- Revenues fall 11.4 per cent - Realised copper prices down 10.6 per cent- China slowdown hurts demand, volatility expected to continueAntofagasta lowered its total dividend for 2013 as revenues declined, reflecting a drop in the price of commodities, although it was far greater than expected.The company recommended a final dividend of 86.1 cents per share (consensus: 24.1 cents), bringing the total dividend to 95 cents, down 3.6% on the prior year. Revenue in the year through December 2013 came to $5.97bn, a year-on-year decrease of 11.4%, as the average price of copper on the London Metal Exchange dipped by 7.9% and realised prices of the metal fell 10.6%. Earnings before interest, tax, depreciation and amortisation (EBITDA) tumbled by 30.1% to $2.7bn and net earnings dropped 36.4% to $659.6m (Canaccord Genuity: $921m) , largely due to the higher withholding tax charges which resulted from the much larger than expected dividend payout.The EBITDA margin was 45.3%, compared to the prior year's 57.3%.A slowdown in China has hurt metal prices, particularly copper, and Antofagasta said it predicts volatility to continue.Falling prices offset record copper production of 721,200 tonnes, up 1.6% on 2012, boosted by higher plant throughput at the Esperanza mine in Chile. Cash costs rose by 9.8% to $1.79 per pound, in line with expectations, due to higher energy costs at Los Pelambres. Net cash costs increased 32% to $1.36 per pound, slightly lower than expectations, reflecting lower molybdenum volumes and lower molybdenum and gold prices."There is no doubt that this has been a challenging year with weaker commodity prices and higher costs, particularly energy," said Chief Executive Diego Hernandez."In this environment we are focused on resetting our cost base and optimising our operating assets, while continuing to invest in the future."The company said its prime focus was on "brownfield growth to deliver greatest returns", including increasing throughput at Esperanza to 105,000 tonnes per day and starting feasibility studies on the Los Pelambres marginal expansion and Encuentro Oxides projects.The Antucoya copper mine in Chile was on schedule and on-budget with a $650m project financing completed in December and ramp-up expected in the first half of 2015."Looking ahead, we expect the operating environment in 2014 to be similar to 2013 and we enter the year in a strong position," Hernandez added. "The changes we have put in place will continue to result in improved operational efficiency, our development projects are on-time and on-budget, and we are focussed on profitability and productivity across the group". The miner ended the year with $1.5bn of net cash on hand, exactly as forecast by analysts.As regards the company's valuation, Canaccord Genuity said: "It is worth pointing out that the final dividend of 86.1cts implies a near-term dividend yield of 6.2% until April 23rd when the shares trade ex dividend. "Interestingly, the large final dividend has been presented as a normal dividend rather than a small "ordinary" dividend and a much larger special dividend as is usually the case. This may signal a change in the underlying dividend payout policy of 35%." RD