Petra Diamonds Net Profit Rises, Doesn't Reinstate Dividend

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 [e-mail]

(END) Dow Jones Newswires

September 19, 2016 05:41 ET (09:41 GMT)

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