Nexa Resources ((NEXA)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Nexa Resources’ recent earnings call struck a balanced tone, reflecting both the company’s strong financial performance and the operational challenges it faces. The company reported substantial increases in EBITDA and cash flow, indicating robust financial health. However, these positive results were tempered by issues such as operational difficulties at the Aripuanã site and rising costs in the smelting segment. Despite these challenges, strategic progress and favorable market conditions for zinc provided a positive outlook.
Strong Financial Performance
Nexa Resources reported a remarkable financial performance, with the fourth quarter adjusted EBITDA reaching $197 million, representing a 79% increase compared to the previous year. The full-year adjusted EBITDA totaled $714 million, marking it as the second highest in the company’s history. This impressive growth underscores Nexa’s ability to capitalize on favorable market conditions and execute its business strategy effectively.
Improved Financial Position
The company noted a notable improvement in its financial position, with an enhanced cash balance and a reduction in gross debt. Additionally, the net leverage ratio improved from 2.2 to 1.7 times, reflecting the company’s commitment to strengthening its financial health and reducing financial risk.
Positive Cash Flow Generation
For the first time since the beginning of the investment cycle in Aripuanã, Nexa Resources generated a positive consolidated cash flow. This milestone is significant as it indicates the company’s ability to generate sufficient cash to support its operations and strategic initiatives.
Progress in Strategic Divestments
Nexa has successfully executed strategic divestments, including the sale of the Morro Agudo complex and other non-core assets. This strategic move allows the company to focus on high-return assets, optimizing its portfolio and enhancing operational efficiency.
Cerro Pasco Integration Project Approval
Nexa announced the official approval of the first phase of the Cerro Pasco integration project. This phase includes the implementation of tailings pumping and piping systems, aimed at extending the life of the mining complex, thereby reinforcing the company’s long-term growth strategy.
Zinc Market Support
The market fundamentals for zinc remain strong, with the LME zinc price increasing by 22% year-over-year in Q4 2024. This price increase was driven by a constrained concentrate supply, supporting Nexa’s financial performance.
Operational Challenges at Aripuanã
The company continues to face operational challenges at its Aripuanã site, with limited tailings filter capacity delaying full production capacity until 2026. Addressing these challenges remains a priority for Nexa to achieve optimal production levels.
Increased Smelting Costs
Nexa reported an increase in consolidated smelting costs, which rose to $1.26 per pound in Q4 2024 from $1.00 per pound in the same period last year. This increase was attributed to higher raw material costs and the operational complexities faced by the company.
Forward-Looking Guidance
Looking ahead, Nexa Resources is optimistic about continued revenue growth in 2025, driven by enhanced operational efficiencies and strategic divestments. The company anticipates that its net leverage ratio will continue to improve and that its new dividend policy will return 20% of free cash flow to shareholders, with a minimum payout of eight cents per common share. Nexa also highlighted the approval of the Cerro Pasco integration project’s first phase, which is expected to bolster its operational capabilities.
In summary, Nexa Resources’ earnings call conveyed a balanced sentiment, highlighting strong financial achievements while acknowledging operational hurdles. Key takeaways include the company’s robust EBITDA growth, improved financial health, and strategic focus on high-return assets. Despite challenges such as increased smelting costs and operational issues at Aripuanã, Nexa’s strategic initiatives and favorable market conditions for zinc provide a solid foundation for future growth.
