Polymetal International plc (LON:POLY) has today announced the Group’s preliminary results for the year ended 31 December 2019, board changes and dividend declaration.
“We are pleased to report record earnings and solid free cash flow for the year underpinned by a robust operating performance and strong commodity prices”, said Vitaly Nesis, Group CEO of Polymetal, commenting on the results. “We have also advanced our key strategic projects, reduced net debt and paid substantial dividends”.
In 2019, revenue increased by 19%, totalling US$ 2,246 million (2018: US$ 1,882 million). Average realised gold and silver prices followed market dynamics and increased by 13% and 11%, respectively. Gold sales were 1,366 Koz, up 14% year-on-year, while silver sales were down 14% to 22.1 Moz, in line with production volume trends and further supported by working capital release.
Group Total cash costs1 for the full year were stable compared to 2018 at US$ 655/GE oz, 1% above the Group’s guidance of US$ 600-650/GE oz owing to higher domestic diesel prices and higher royalties. All-in sustaining cash costs1 (AISC) were broadly unchanged from 2018 at US$ 866/GE oz, 2% above the Group’s guidance of US$ 800-850/GE oz, driven by the same factors.
Polymetal posted record Adjusted EBITDA1 of US$ 1,075 million, a 38% increase over 2018, against the backdrop of higher production volumes, higher commodity prices, and stable costs. Adjusted EBITDA margin reached 48% (2018: 41%).
Net earnings were a record US$ 483 million (2018: US$ 355 million), with basic EPS of US$ 1.02 per share (2018: US$ 0.78 per share). Underlying net earnings1 increased by 31% to US$ 586 million on the back of higher operating profit.
Capital expenditure was US$ 436 million, up 27% compared to US$ 344 million in 2018 and above the initial guidance of US$ 380 million, mostly due to accelerated pre-stripping and construction at Nezhda. Construction at Nezhda is around 45% complete as of year end.
Net debt1 decreased to US$ 1,479 million (31 December 2018: US$ 1,520 million), representing a Net debt/Adjusted EBITDA ratio of 1.38x (2018: 1.95x), well below the Group’s target leverage ratio of 1.5x. The Company continued to generate significant free cash flow1 which amounted to US$ 299 million (2018: US$ 134 million), supported by a net cash operating inflow of US$ 696 million (2018: US$ 513 million).
A final dividend of US$ 0.42 per share (approx. US$ 197 million) representing 50% of the Group’s underlying net earnings for 2H 2019 has been proposed by the Board in accordance with our dividend policy while remaining within the Net debt/Adjusted EBITDA target of 1.5x and comfortably below the hard ceiling ratio of 2.5x. In January 2020, the Board also announced a special dividend of US$ 0.20 per ordinary share (approx. US$ 94 million). This will bring the total dividend declared for FY 2019 to US$ 385 million (2018: US$ 223 million), or US$ 0.82 per share versus US$ 0.48 per share in 2018.
OPERATING AND ESG HIGHLIGHTS
The Company’s FY2019 GE production amounted to 1,614 Koz, an increase of 3% over 2018 and 4% above the original production guidance of 1.55 Moz. A strong contribution from Kyzyl more than compensated for asset disposals while the rest of the portfolio continued to demonstrate stable results. Production from continuing operations grew by 14% year-on-year to 1,609 Koz GE.
Full year gold production totalled 1,316 Koz, a 8% increase year-on-year, while silver output decreased by 15% on the back of asset disposals and planned grade decline at Dukat.
Safety performance in 2019 deteriorated both in terms of frequency of lost-time injuries and the number of fatalities. The Board approved significant safety-related changes to the remuneration structure for all levels of the Company management together with a comprehensive action plan focused on impacting behaviors and attitudes of employees.
Our operational achievements are underpinned by the value that we place on environmental, social and governance (ESG) issues and this has contributed to Polymetal’s international recognition as a leading ESG advocate within Russia and the CIS. In 2019, the Company was reaffirmed as a member of the Dow Jones Sustainability and FTSE4Good indices, MSCI ESG Ratings score improved from BBB to A.
The Company reiterates its current production guidance of 1.6 Moz of GE for each of FY2020 and 2021. Traditionally, production in both years will be weighted towards 2H due to seasonality.
TCC in 2020 is expected to be in the range of US$ 650-700/GE oz while AISC is expected at US$ 850-900/GE oz. The expected increase over 2019 cost levels is driven by the appreciation of the Russian rouble and increased domestic diesel fuel prices compared to 2019, as well as increased royalties on the back of continued strong gold and silver price performance. The guidance remains contingent on the Rouble/Dollar exchange rate and oil price.
A final dividend of US$ 0.42 per share (2018: US$ 0.31 per share) or approx. US$ 197 million in total representing 50% of the Group’s underlying net earnings for 2H 2019 has been proposed by the Board in accordance with the dividend policy while staying remaining within the Net Debt/Adjusted EBITDA target of 1.5x and significantly below the hard ceiling ratio of less than 2.5x.
This brings the total dividend declared for the FY 2019 to the record level since the Company’s IPO of US$ 0.82 per share (2018: US$ 0.48 per share) or approx. US$ 385 million (2018: US$ 223 million) and the dividend yield to 6.5% calculated based on an average share price in 2019. The 5-year dividend yield averaged 5%.
The final dividend will be subject to shareholder approval at the Annual General Meeting of the Company to be held on 27 April 2020. Assuming shareholder approval is received, the dividend will be paid on 29 May 2020 in US Dollars, with an option for shareholders to elect to receive the dividend in pounds sterling or euro. Such an election should be made no later than 12 May 2020. Payments in pounds sterling and euro will be based on the USD/GBP and USD/EUR exchange rates determined by the Company on 15 May 2020 and announced immediately thereafter.
Polymetal announces changes in its Board of Directors.
Christine Coignard (Independent Non-Executive Director) and Jean-Pascal Duvieusart (Non-Executive Director) have notified the Company that they will not be standing for re-election at the upcoming AGM. Andrea Abt has been appointed as an Independent Non-Executive Director.
Ms Coignard commented: “At the time of the AGM, I will have served six years on Polymetal’s Board: as Senior Independent Director; Chair of the Remuneration Committee; a member of both the Audit and Risk Committee and the Nomination Committee. These have been exciting times during which, and on all strategic, operational, financial and ESG fronts, Polymetal has become a world leader in the precious metals sector. It has been an honour to have contributed to this in my role as a Director. As the Company embarks on the next phase of its development and fine tunes its corporate culture including diversity across all levels of the organisation, I feel it is time for me to move on and make room for new sets of skills on the Board. I thank all our shareholders for their strong and consistent support over these years. I also thank all my colleagues throughout the organisation for our efforts as a team and for the exceptional times we had the chance to work together, especially at the production units.”
Mr Duvieusart was appointed as the Executive Director and CEO of Home Credit N.V. in January 2020 and decided not to hold the directorship position in Polymetal concurrently.
Ian Cockerill, Polymetal International Board Chair, commented: “I am thankful to Christine and Jean-Pascal for their contribution to the Company’s success. As the Chair of the Remuneration Committee, Christine has been pivotal in shaping Polymetal’s governance and remuneration practices. Congratulations to Jean-Pascal on his new role and I appreciate that it is no longer possible to continue as a non-executive Director. I am also glad to welcome Andrea, an inspired professional with diverse and successful executive and directorship track record. She brings crucial skills for Polymetal of supply chain management and successful implementation of IT transformation.”
Ms Abt has almost 30 years of experience in international management and leadership roles in a wide variety of challenging environments in the Daimler Benz and Siemens groups: building organisations, consolidating, turning them around in the areas of transportation (rail and aerospace), logistics, IT and more traditional manufacturing businesses. Her background includes leading teams in sales, services, procurement and most recently, Chief Procurement Officer and Head of Supply Chain Management of global organisations. Since 2014, she focused on an international portfolio of non-executive and supervisory board positions mainly in the UK and Germany in a broad range of industries. Ms Abt holds MA degree (equivalent) in Language and Literature from the University of Bonn, Germany, and MBA from Rotman School of Management, University of Toronto, Canada.