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KAZ Minerals PLC cuts dividend as profits and cash flow slump

The interim dividend was cut to 4.0 cents per share from 6.0 last time as the Kazakh miner stressed that it was undergoing “a period of significant capital investment”

Kaz Minerals - copper ore
Copper prices have not been helpful for Kaz

KAZ Minerals PLC (LON:KAZ) was more cautious on the short term copper market outlook due to pressures on world trade and concerns about China’s economic slowdown, but the Kazakh miner said the long term outlook was “robust”.

Revenues of US$1.05bn for the six months to June were down slightly versus US$1.1bn last time, as improved production drove a 3% increase in copper sales volumes, offset by an 11% lower copper price on the London Metal Exchange.

Earnings beat forecasts

Underlying earnings (EBITDA) fell 10% to US$620mln, which was not as bad as the market was expecting, with margins squeezed to 59% from 63% a year ago, while reported profit before tax dropped 19% to US$289mln.

Free cash flow slumped 41% to US$182mln, amid higher investing and financing outflows, and net debt swelled 25% to US$2.6bn, with the cash balance down 40% to US$739mln.

The interim dividend was cut to 4.0 cents per share from 6.0 last time as KAZ stressed that it was undergoing “a period of significant capital investment”, with major uses of cash during the period including  US$436m to acquire the Baimskaya copper project in Russia and US$332m invested in mine expansion projects.

Mixed feelings

Broker Shore Capital said the interim dividend would be equivalent to “an uninspiring annualised yield” of around 1.3%.

Analysts at Peel Hunt said better gold sales drove a small beat against consensus EBITDA forecasts.

“Despite the better EBITDA, working capital outflows plus higher overall capex and acquisition spending meant net debt a fraction higher than we expected.

“The increase to capex spending means that net debt will likely peak higher than our present estimate suggest, something that will refocus investors on the balance sheet given current market fears over economic growth rates.”

KAZ shares dropped 6% to 466.87p within the first hour of trading on Thursday.

Quick facts: KAZ Minerals PLC

Price: 488.4 GBX

LSE:KAZ
Market: LSE
Market Cap: £2.31 billion
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