Petra Diamonds Net Profit Rises, Doesn't Reinstate Dividend
19 September 2016 - 7:56PM
Dow Jones News
By Alex MacDonald
LONDON--South African diamond miner Petra Diamonds Ltd. (PDL.LN)
reported Monday a 12% rise in full-year net profit buoyed by higher
diamond output but didn't reinstate dividend payments given its
hefty debt burden.
The U.K.-listed miner, which has been investing heavily since
2009 to shift its operations toward mining new high-grade areas
within its mines, reported net profit of $54 million for the year
ended June 30, compared with $49 million in the same period a year
earlier.
Revenue rose 1.4% to $431 million over the same period, helped
by a 16% rise in output to 3.7 million carats, which more than
offset a 6% decrease in realized sale prices.
The company reaffirmed its plans to boost diamond recovery by
25% to 30% to 4.6 million to 4.8 million carats this financial
year. This includes diamonds from January's purchase of the
Kimberley Mines assets.
Petra Diamonds' shares were up 0.9% at 114.5 pence a share at
0842 GMT. "Operationally, Petra performed in line with
expectations," said Canaccord Genuity analyst Nick Hatch. "However,
the lack of dividend, against market expectations, is a
disappointment."
Petra also said its revised maintenance covenants were
comfortably met by a June-end deadline. However, its dividend
distribution covenants weren't met, prompting Petra to abstain from
reinstating dividend payments for 2016.
Petra said that if the current positive production and trading
conditions continue, "Petra will revisit this with its lender group
post H1 FY 2017, with the intention to resume dividends as soon as
possible."
Petra declared its maiden dividend of $0.03 a share for 2015 but
then abstained from making further payments, reflecting weaker
rough diamond prices and hefty spending on improving its
operations.
Petra's net debt grew to $385 million as of June-end, up from
$172 million a year earlier after spending $324 million on its
operations last financial year, the highest level since 2009.
Capital spend is now forecast to fall to $218 million this year and
to around $130 million the following year, resulting in higher
cashflow generation, according to Chief Executive Johan
Dippenaar.
Net debt may rise to $450 million to $470 million this financial
year, but then fall as cashflow improves, Mr. Dippenaar said. This
puts the company in a strong position to secure approval from its
banks to restart dividend payments soon, he added.
Petra Diamonds has already had a strong start to the year with
the sale of around 745,000 carats for $94 million. "We normally do
$140 million to $150 million" in a half year, he noted.
The company remains cautious about this financial year's diamond
pricing outlook, forecasting average like-for-like sales prices on
par with a year earlier. "The market is in better shape than people
expected," said but there are no fireworks, said Mr.Dippenaar.
--Write to Alex MacDonald at alex.macdonald@wsj.com
(END) Dow Jones Newswires
September 19, 2016 05:41 ET (09:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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