Jefferies has described Fresnillo PLC's (LSE:FRES) first-half results as a clean beat across the board, with earnings, cash flow and sales volumes all coming in ahead of forecasts and capital spending guidance cut sharply.
The Mexican precious metals producer reported earnings per share of $1.75, against the broker's $1.45 estimate and consensus of $1.66.
Gross profit of $2,359 million beat Jefferies at $2,233 million and consensus at $2,266 million.
The beat came from a combination of lower below-the-line items, lower operating costs and higher metal sales volumes.
Adjusted revenue reached $3,413 million and the cost of sales came in at $1,023 million, below the broker's $1,115 million estimate.
Earnings before interest, tax, depreciation and amortisation of $2,350 million edged past both Jefferies and consensus.
Free cash flow was the standout, calculated at $1,257 million against expectations closer to $710 million, on operating cash flow of $1,493 million after working capital and capital spending of just $236 million.
Net cash grew to $1.7 billion by the half-year mark, well ahead of the $1.3 billion the market had pencilled in.
Silver sales volumes of 23.4 million ounces exceeded production of 22 million ounces, while gold sales of 284,000 ounces lagged production but beat forecasts.
The interim dividend of $0.43 landed in line with Jefferies but below the $0.60 consensus expected.
Full-year production guidance is unchanged, though capital spending guidance has been cut by around 31% to a range of $500 million to $550 million.
Fresnillo expects higher gold output from Herradura and Fresnillo in 2027 and 2028, with lower silver production from Saucito.
Jefferies considers the shares fairly valued at current levels, trading on 1.2 times forward net asset value and 6.2 times attributable enterprise value to earnings.
The premium to gold peers is warranted, the broker said, reflecting the scarcity value of a large, low-cost portfolio of high-quality silver mines.
In afternoon trading, the shares were up 2% at 2,551p,
