Antofagasta Net Profit Rises; Reaffirms Output Guidance-Update

By Alex MacDonald

LONDON--Chilean copper producer Antofagasta PLC (ANTO.LN) Tuesday reported higher net profit for the first half of the year following the sale of its water division and reaffirmed its revised full-year output guidance after a delay in the commissioning of its Antucoya growth project.

The FTSE 100 miner reported net profit of $706 million for the first six months of the year compared with $331 million in the same period a year earlier. This included $620 million profit from the sale of its water division in June for $947 million.

The sale more than offset a 31% drop in revenue to $1.79 billion due to lower copper prices and volume sales.

Antofagasta's shares are down 27% since the beginning of the year, making its the sixth worst performer in the U.K's blue-chip FTSE 100 index. The company has suffered as the price of copper falls to a six-year low as concerns abound that China, the world's biggest consumer of the red metal, might buy less if its economy slows down. Shares were also hit by protests, heavy rainfall, and a delay in the commissioning of its Antucoya project to the third quarter, all of which prompted the company to cut its copper output guidance twice this year.

Nevertheless, Antofagasta's shares rose 3.7% at 552.5 pence a share on Tuesday, in line with a broader 3.5% recovery in the FTSE 350 mining index following Monday's global stock market rout.

"With our robust balance sheet and cash generative operations we are well positioned for the current low point in the copper price cycle," Chief Executive Officer Diego Hernandez said.

Looking ahead, he expects a small supply surplus of about 300,000 tons of copper by the end of this year with demand picking up in the second half from the first half as China's government takes measures to boost industrial activity and consumption. The copper supply-demand balance should tighten further by 2017 as supply growth fails to keep pace with demand growth.

The company reaffirmed its plan to produce 665,000 tons of copper this year, down from an earlier estimate of 695,000 tons. This should pick up in the year ahead due to the ramp up of its Antucoya project, completion of its $1 billion purchase of a 50% stake in the Chilean Zaldívar mine by the end of this year, and expansion of its Centinela concentrates operations.

The miner also reaffirmed this year's revised cash cost guidance after by-product credits of $1.47 a pound.

Antofagasta declared an interim dividend of 3.1 cents per share, representing a 35% pay-out ratio of the half-year net earnings. The company had about $1 billion in net cash at the end of June, of which $980 million will be spent on the Zaldivar purchase.

It also remains focused on cutting costs, having already achieved 44% of its targeted $160 million in cost savings for this year.

Write to Alex MacDonald at [e-mail]

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August 25, 2015 04:40 ET (08:40 GMT)

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