Impairments and losses at closed operations push Petra deeply into the red
Chair Adonis Pouroulis says the diamond company is in position to reap the benefits of its expansion
Petra Diamonds reported a $201m full-year net loss mainly because of impairments, but an operational improvement left the London-listed company better able to tackle its debt as its CEO Johan Dippenaar prepared to step down.
Petra, which has four mines in SA and one in Tanzania, reported a net loss of $203m for the year to end-June compared with a $21m profit the previous year. Revenue was 25% higher at $495m and mining profit was up by a third to $195m.
It recorded impairments in excess of $150m against its Koornfontein mine and its KEM joint venture in Kimberley, which it is leaving.
Output for the year, excluding KEM, was 19% higher at 3.8 million carats.
Including the KEM joint venture, production was up 15% to 4.6 million carats.
“These results paint an underlying picture of operational improvements and the development of a corporate structure more in keeping with a miner moving from being capex-intensive to a stable and larger producer and, hopefully, a strong free-cash flow generator,” Canaccord Genuity analyst Des Kilalea said.
Petra’s shares increased by almost 6% to nearly 39p, giving the company a market capitalisation of £317m.
The share price has, however, fallen 40% so far in 2018 as investors fretted about the company’s large debt pile and missing production targets at its key Cullinan mine.
During the year, Petra conducted a $170m rights issue of which it spent $107m repaying debt in SA.
Acknowledging the underperformance in 2017 and early in 2018, Dippenaar said the company’s strategy was clear now that its Cullinan and Finsch mines were on track.
“Learning from past challenges, the group’s focus is to regain investor confidence by the continued optimisation of operations, thereby delivering consistent production output with efficient operating and capital expenditure,” he said.
Petra’s debt levels peaked at $634m, or five times net debt to earnings before interest, tax, depreciation and appreciation. It has fallen to 2.7 times in the 2018 financial year after the rights issue and it targeted to two times or less by 2020.
One of the key areas of unhappiness was the empowerment party’s debt of more than $80m held in Petra’s debt and this would be addressed, said CFO Jacques Breytenbach.
Petra chair Adonis Pouroulis said Dippenaar had overseen the growth of the company to 4.6 million carats from 175,000 carats 12 years ago.
He said that during this time the group had snapped up diamond mines in SA as De Beers sold them, as well as the Williamson mine in Tanzania.
Petra is positioned to reap the benefits of its expansion, said Pouroulis. Dippenaar will continue in the role of CEO until a successor has been appointed and will work closely with the board to ensure an efficient handover, he said.