Currency in USD
Last close As at 25/03/2023
USD17.46
▲ 0.42 (2.46%)
Market capitalisation
USD3,588m
Research: Metals & Mining
Pan American Silver (PAAS) reported an encouraging set of Q4/FY22 results, with Q4 EBITDA of US$92.3m exceeding consensus expectations by c 21% and FY22 EBITDA coming in at US$272m, c 6% above consensus. The bottom line was negatively affected by US$157.3m of one-off costs relating to the Yamana transaction, which is expected to be completed in Q123. Our valuation and forecasts remain under review.
Pan American Silver |
FY22 results beat consensus expectations |
FY22 results update |
Metals and mining |
1 March 2023 |
Share price performance
Business description
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Pan American Silver is a research client of Edison Investment Research Limited |
Pan American Silver (PAAS) reported an encouraging set of Q4/FY22 results, with Q4 EBITDA of US$92.3m exceeding consensus expectations by c 21% and FY22 EBITDA coming in at US$272m, c 6% above consensus. The bottom line was negatively affected by US$157.3m of one-off costs relating to the Yamana transaction, which is expected to be completed in Q123. Our valuation and forecasts remain under review.
Year end |
Revenue |
EBITDA |
EPS* |
DPS |
P/E |
Yield |
12/20 |
1,338.8 |
469.1 |
0.57 |
0.22 |
25.8 |
1.5 |
12/21 |
1,632.8 |
593.2 |
0.60 |
0.34 |
24.6 |
2.3 |
12/22 |
1,494.7 |
272.0 |
(0.51) |
0.45 |
N/A |
3.0 |
Note: *EPS is normalised, excluding exceptional items.
FY22 results above consensus at the operating level
PAAS had already reported FY22 production of 18.5Moz for silver and 552.5koz for gold, both within the revised and original guidance, respectively. Silver and gold segment cash costs were reported earlier at US$12.7/oz (AISC of US$16.6/oz) and US$1,113/oz (US$1,459/oz). FY22 EBITDA came in at US$272m versus consensus expectations of c US$256m, while revenues of US$1,495m were affected by the inventory build-up of c US$45-50m in Q4. The bottom line was distorted by US$212m of exceptionals, including US$157m in one-off costs associated with the Yamana transaction. Excluding Yamana costs, FY22 company adjusted net profit came in at US$17.9m (US$4.8m in adjusted net loss in Q422). PAAS has swung into net debt of US$118m (US$82m including ST investments; FY21 net cash of US$238m) after raising US$160m in debt to fund the Yamana/ Gold Fields termination fee. However, its liquidity should be boosted by the sale of Maverix shares in January, realising US$105m in net proceeds. A Q422 dividend of US$0.10/share implies a full-year paid dividend of US$0.45, a healthy 3% yield.
Project update: Escobal ILO 169 remains on track
PAAS reported that the ILO 169 process at the Escobal project continues to progress with two meetings held in Q422. Further, in December the Ministry of Energy and Mines and Xinka representatives delivered a progress report on the consultation process to the Guatemalan Supreme Court of Justice. We continue to expect Escobal to be recommissioned in FY24. In other news, PAAS has put the Manatial Espejo project in Argentina (3.5Moz of silver in FY22) on care and maintenance due to the end of the mine’s life.
Valuation: Solid fundamentals intact
PAAS share price remains weak, despite the generally supportive performance of gold and silver prices and the accretive nature of the Yamana transaction. While the Yamana deal has some execution risks attached to it, primarily associated with the different approach to cost accounting, we believe the upcoming release of combined guidance by PAAS might provide some welcome visibility for investors. The stock is currently trading at a consensus FY23e EV/EBITDA of 10x (FY24e 4.2x), which appears to be an undemanding multiple, especially in light of the transformative Yamana deal. Our estimates and valuation remain under review.
Exhibit 1: Financial summary
$'m |
2020 |
2021 |
2022 |
||
31-December |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||
Revenue |
|
|
1,338.8 |
1,632.8 |
1,494.7 |
Cash production costs |
(696.7) |
(925.5) |
(1,094.4) |
||
DD&A |
(254.5) |
(303.0) |
(316.0) |
||
Royalties |
(27.5) |
(36.4) |
(35.9) |
||
Gross Profit |
360.2 |
367.9 |
48.4 |
||
G&A |
(36.4) |
(34.9) |
(29.0) |
||
Other operating costs |
(109.2) |
(42.9) |
(63.5) |
||
Operating profit (before amort. and excepts.) |
|
|
214.6 |
290.2 |
(44.1) |
EBITDA |
|
|
469.1 |
593.2 |
272.0 |
Other operating expenses |
(5.5) |
30.7 |
(6.4) |
||
Exceptionals* |
0.0 |
0.0 |
(211.8) |
||
Reported operating profit |
209.1 |
320.9 |
(262.3) |
||
Net Interest and finance expense |
(20.1) |
(16.2) |
(22.5) |
||
Profit Before Tax (norm) |
|
|
194.5 |
274.0 |
(66.6) |
Investment income (loss) |
63.0 |
(59.7) |
(16.2) |
||
Profit Before Tax (reported) |
|
|
252.0 |
245.0 |
(301.0) |
Reported tax |
(75.6) |
(146.4) |
(39.1) |
||
Profit After Tax (norm) |
118.9 |
127.6 |
(105.7) |
||
Profit After Tax (reported) |
176.5 |
98.6 |
(340.1) |
||
Minority interests |
(1.4) |
1.1 |
1.7 |
||
Net income (normalised) |
120.4 |
126.5 |
(107.4) |
||
Net income (reported) |
177.9 |
97.4 |
(341.8) |
||
Average Number of Shares Outstanding (m) |
210 |
210 |
211 |
||
EPS – basic normalised ($) |
|
|
0.57 |
0.60 |
(0.51) |
EPS – normalised fully diluted ($) |
|
|
0.57 |
0.60 |
(0.51) |
EPS – basic reported ($) |
|
|
0.85 |
0.46 |
(1.62) |
Dividend ($) |
0.22 |
0.34 |
0.44 |
||
BALANCE SHEET |
|||||
Fixed Assets |
|
|
2,577.0 |
2,517.4 |
2,444.1 |
Tangible assets |
2,415.0 |
2,344.6 |
2,226.4 |
||
Investments |
71.6 |
78.7 |
121.2 |
||
Other |
90.4 |
94.2 |
96.6 |
||
Current Assets |
|
|
856.9 |
1,001.2 |
806.5 |
Inventories |
406.2 |
500.5 |
471.6 |
||
Receivables |
127.8 |
128.2 |
136.6 |
||
Cash |
167.1 |
283.6 |
109.1 |
||
ST investments |
111.9 |
51.7 |
35.3 |
||
Other |
43.9 |
37.3 |
53.8 |
||
Current Liabilities |
|
|
(361.8) |
(387.7) |
(380.8) |
Creditors |
(281.9) |
(306.1) |
(308.1) |
||
Short term borrowings and leases |
(12.8) |
(14.1) |
(27.3) |
||
Other |
(67.0) |
(67.5) |
(45.5) |
||
Long Term Liabilities |
|
|
(466.3) |
(494.9) |
(666.0) |
LT debt and leases |
(20.7) |
(31.8) |
(199.5) |
||
Other long term liabilities |
(445.5) |
(463.1) |
(466.5) |
||
Net Assets |
|
|
2,605.8 |
2,636.0 |
2,203.7 |
Minority interests |
(3.3) |
(4.5) |
(6.1) |
||
Shareholders’ equity |
|
|
2,602.5 |
2,631.6 |
2,197.6 |
CASH FLOW |
|||||
Operating Cash Flow |
176.5 |
98.6 |
(340.1) |
||
D&A, exceptionals, other |
280.5 |
498.9 |
555.2 |
||
Working capital movement |
97.0 |
(71.1) |
(42.0) |
||
Tax |
(81.6) |
(129.2) |
(137.8) |
||
Net Interest |
(10.0) |
(5.1) |
(3.4) |
||
Net operating cash flow |
|
|
462.3 |
392.1 |
31.9 |
Capex |
(178.6) |
(243.5) |
(274.7) |
||
Acquisitions/disposals |
22.5 |
45.8 |
8.7 |
||
Equity financing |
4.7 |
0.6 |
0.9 |
||
Dividends |
(46.2) |
(71.5) |
(92.6) |
||
Other |
59.1 |
(2.3) |
20.0 |
||
Net Cash Flow |
323.8 |
121.2 |
(305.8) |
||
Opening net debt/(cash), including ST investments |
|
|
77.9 |
(245.5) |
(289.4) |
FX and other |
(0.5) |
(77.3) |
(66.0) |
||
Closing net debt/(cash), including ST investments |
|
|
(245.5) |
(289.4) |
82.4 |
Closing net debt/(cash), excluding ST investments |
(133.5) |
(237.7) |
117.8 |
Source: Pan American Silver, Edison Investment Research. *Note: Exceptionals include impairments, the Yamana termination fee and income from equity investees.
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