Antofagasta PLC (LON:ANTO) topped the blue-chip fallers on Tuesday after the Chilean miner said trade tensions are clouding the short-term copper demand outlook as it reported a drop in first-half earnings and cut its dividend.
The FTSE 100-listed group saw its underlying earnings (EBITDA) fall by 16.2% to US$904.2mln for the first six months of 2018, down from US$1.079bn a year earlier.
READ: Antofagasta reports higher quarterly output despite pipeline blockage at Los Pelambres
The earnings drop came despite first-half revenue rising by 3.6% to US$2.121bn as higher realised prices offset lower copper sale volumes.
The group’s EBITDA margin fell to 42.6%, down from 52.7% during the same period last year as unit production costs increased.
However, it kept its group copper production and net cash cost guidance for the full year unchanged at 705-740,000 tonnes at US$1.35/lb as it said grades continue to improve over the rest of the year.
In its results statement, Antofagasta said: "The copper market outlook in the mid to longer term continues to be favourable as demand is expected to grow at around 2% while supply growth remains constrained."
But, it added: "In the shorter term, there is considerable market uncertainty with the outcome of current international trade negotiations unclear."
The group is paying an interim dividend of 6.8 US cents per share, down 34% from the 10.3 US cents pay-out a year earlier.
In early morning trading, Antofagasta shares were 5% lower at 904.8p.
"Share price could suffer heavier damage"
Russ Mould, investment director at AJ Bell commented: “Today’s results from copper producer Antofagasta fall down on nearly every measure. Earnings, margins and the dividend are all well short of what had been pencilled in by analysts.”
“The blame is pinned on production issues, higher input costs and a stronger Chilean peso and for now the market appears happy to take the company at its word that this was just a bad half year period and that things will get much better in the second half.
He added: “The shares have fallen since early June. However, the highs achieved by the stock during that period were driven by a spike in copper prices, in turn, the result of miners threatening to strike in Chile and potentially cause a major supply disruption.
“Putting this fairly anomalous trading to one side, the shares have barely shifted in the last 12 months. If the company is unable to follow through on the guided second half improvement, underpinned by a reduction in costs and rising output, then the share price could suffer heavier damage.”
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