The bad news keeps on coming for Newcrest Mining (NCM), but the market ignored the latest bout yesterday.
We’ve already had the big write down (but a reasonably solid production outlook for the new financial year), which was put at $6.22 billion last week.
Yesterday’s full 2012-13 financial report revealed more woes – a weaker than expected underlying profits and possible taxation concerns in Australia and Indonesia.
As well, the report yesterday did not contain any update on the investigation into the way the news of the write downs were first released to the market in early June. Former ASX chairman Maurice Newman is conducting a company-paid investigation, while corporate regulator ASIC is also on the case.
The big write downs were always going to produce a whopping great loss for Newcrest for 2012-13 – the final figure was $5.77 billion in yesterday’s report – so that wasn’t ‘new’ news.
What did surprise was an undershoot on the downside in underlying earnings, some $451 million against market forecasts (hopes?) of around $485 million.
The cause was easily identified – the weak gold price, especially in the final quarter and the indifferent production performance over the year.
In all, the $451 million represents a near 60% plunge from 2011-12’s $1.08 million underlying result (and the $1.1 billion actual net profit).
NCM YTD – Newcrest rallies despite $5.7b loss
And, as announced in the early June statement to the market, Newcrest shareholders will go without a dividend this year, which will further add to the pain of the company’s weak performance in recent years.
That was explained in yesterday’s statement this way: "The Newcrest Board has determined there will be no final dividend in relation to the 2013 financial year due to the reduced level of profitability in the 2013 financial year, the increase in the level of gearing at 30 June 2013, and the planned application of operating cash flow to progression of the Cadia East Panel Cave 2 in the coming 2014 financial year".
But the company reassured investors that despite the problems, it was still conservatively geared.
"At 30 June 2013, Newcrest’s gearing level was 29.1% and the Company had A$958 million in cash and undrawn, committed bank facilities (at the applicable exchange rates).
"Newcrest remains committed to maintaining a conservative balance sheet and is managing its business activity in the lower gold price environment with the objective of being free cash flow neutral or positive in the 2014 financial year," the company said.
Newcrest has already reacted to the 22% fall in the gold price this year by cutting costs.
Gold production has been reduced at high cost mines and it hopes all its mines will be profitable in the 2014 financial year at a gold price of $A1450 per ounce.
Newcrest repeated its production guidance for 2014, predicting gold production would rest between 2 million ounces and 2.3 million ounces.
The company also announced it was under review by tax offices in both Indonesia and Australia for various issues.
The Australian tax investigation is into six years of financial reports – between 2005 and 2011 – and is analysing research and development claims made by the company.
The shares jumped more than 8%, or 96c yesterday to end at $12.44 – it seems the market was expecting worse and was pleased when only the lower than forecast profit and the tax probes were revealed.
