Nexa Resources’ Earnings Call: Challenges and Progress

Nexa Resources ((NEXA)) has held its Q1 earnings call. Read on for the main highlights of the call.

Nexa Resources Faces Operational Hurdles Amid Strategic Progress

Nexa Resources’ recent earnings call painted a picture of mixed sentiments. The company is grappling with significant operational challenges, primarily due to environmental factors, which have led to decreased production volumes and increased leverage. Despite these hurdles, Nexa remains optimistic, citing progress in strategic projects and benefiting from increased metal prices. However, the overall sentiment during the call was overshadowed by the operational and financial difficulties encountered in the quarter.

Increase in Zinc Market Prices

The earnings call highlighted a positive trend in the zinc market, with the London Metal Exchange (LME) zinc price averaging $2,838 per ton, marking a 16% increase year-over-year. This price surge is a silver lining for Nexa amidst its operational challenges, providing a boost to its revenue streams.

Copper and Silver Price Improvements

Nexa also benefited from favorable market conditions for copper and silver. The LME copper price averaged $9,340 per ton, up 11% year-over-year, while the LME silver price saw a significant increase to $32 per ounce, up 37% year-over-year. These improvements in metal prices are crucial for Nexa as it navigates through its operational setbacks.

Cerro Pasco Integration Project Progress

On the strategic front, Nexa reported that Phase 1 of the Cerro Pasco Integration project is progressing on schedule. This project includes the development of a tailings pumping and piping system, which is critical for extending the life of the company’s assets and enhancing operational efficiency.

Adjusted EBITDA and Margin

Despite the challenges, Nexa achieved an adjusted EBITDA of $125 million, with a margin of 20% for the quarter. This performance underscores the company’s resilience and ability to maintain profitability even in the face of adverse conditions.

Operational Challenges and Production Declines

The company faced significant operational challenges, with zinc production in Q1 2025 dropping to 67,000 tons, a 23% decline year-over-year. This decrease was primarily attributed to heavy rainfall and operational issues, which have been a major concern for Nexa.

Negative Working Capital Impact

Nexa reported a negative working capital impact of $265 million, driven by seasonal factors and taxes. This impact is expected to normalize over the coming quarters, providing some relief to the company’s financial position.

Increased Leverage

The company’s net debt-to-adjusted EBITDA ratio increased from 1.7x to 2.1x. This rise in leverage is primarily due to a decreased cash balance and lower adjusted EBITDA, reflecting the financial strain caused by operational challenges.

Smelting Segment Challenges

Nexa’s smelting segment faced difficulties, with total smelting sales decreasing by 6% year-over-year and the cash cost rising to $1.17 per pound. These challenges highlight the pressures on the company’s smelting operations amid fluctuating market conditions.

Forward-Looking Guidance

Looking ahead, Nexa provided guidance for the upcoming quarters, maintaining its adjusted EBITDA at $125 million with margins within historical ranges. The company expects production volumes to stabilize as the impact of heavy rainfall subsides. Nexa reaffirmed its 2025 CapEx guidance at $347 million and remains committed to extending the life of its assets through ongoing projects like the Cerro Pasco Integration project. The negative working capital impact is anticipated to normalize, offering a more stable financial outlook.

In conclusion, Nexa Resources is navigating a challenging landscape marked by operational and financial hurdles. While the company is benefiting from increased metal prices and strategic project progress, the overall sentiment remains cautious due to the significant challenges faced. Investors and stakeholders will be closely watching Nexa’s efforts to stabilize production and improve its financial metrics in the coming quarters.