Petra Diamonds Ltd (STU:FPO) (FY 2024) Earnings Call Highlights: Navigating Challenges with ...
Revenue: Increased from $325 million to $367 million.
Adjusted EBITDA: Decreased from $113 million to $66 million, with an adjusted EBITDA margin of 18%.
Net Loss After Tax: $107 million, compared to a loss of $102 million in the prior year.
CapEx: Reduced from $117 million to $84 million.
Operational Free Cash Flow: Improved from negative $65 million in FY23 to negative $17 million in FY24.
Net Debt: Decreased from $212 million at the end of December '23 to $201 million at June '24.
Diamond Prices: Like-for-like prices down 12.4% compared to the prior year.
Cost Reductions: Achieved $80 million in CapEx savings and sustainable cost savings of $44 million for FY25.
Inventory Movement: $71 million swing in diamond inventory movement year on year.
Release Date: September 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Petra Diamonds Ltd (STU:FPO) successfully reduced its operating cost base by $19 million and CapEx by $80 million in FY24, with plans to sustainably reduce operating costs by $44 million annually from FY25.
The company repurchased $12 million of its 2026 second lien loan notes at a discount, saving approximately $1.2 million in future annual interest costs.
Despite weaker diamond prices, Petra Diamonds Ltd (STU:FPO) reported an increase in revenue from $325 million to $367 million, supported by increased contributions from the Williamson operation.
The company has maintained a focus on safety, achieving seven fatality-free years and reducing its lost time injury frequency rate from 0.24 to 0.16.
Petra Diamonds Ltd (STU:FPO) is well-positioned to generate free cash flow through market cycles, with a smooth capital profile and reduced cost base, targeting net debt-to-EBITDA below 1.5x by FY26.
Negative Points
Adjusted EBITDA decreased significantly from $113 million to $66 million due to weaker diamond prices and inventory movements.
The company reported a net loss after tax of $107 million, compared to a loss of $102 million in the prior year, impacted by impairments totaling $78 million.
Operational free cash flow remained negative, improving only slightly from negative $65 million in FY23 to negative $17 million in FY24.
Diamond prices saw a 12.4% decline year-on-year, with market weakness persisting throughout FY24.
Net debt increased year-on-year, with consolidated net debt at $201 million as of June 2024, despite efforts to reduce operating costs and defer CapEx.
Q & A Highlights
Q: Could you provide guidance for fiscal year '25, specifically regarding the expected free cash flow inflection point? A: Richard Duffy, CEO: We are targeting net cash generation for the full year of FY25. While we anticipate modest cash generation in FY25 and FY26 due to ongoing project ramp-ups, significant growth is expected from FY27. Cash flow may fluctuate throughout the year, but the objective remains net cash generation for the full year.
Q: What progress has been made on refinancing plans, and what happens if refinancing isn't completed by year-end? A: Richard Duffy, CEO: We are in ongoing discussions with banks regarding refinancing our loan notes and aim to have a plan by the end of the calendar year. Meanwhile, we will continue opportunistic repurchases of loan notes on the market.
Q: Is it possible to use the revolving credit facility (RCF) to buy back loan notes from the secondary market? A: Jacques Breytenbach, CFO: Yes, we have an approved basket in our first lien financing arrangements with Absa Bank, allowing us to use up to $25 million per fiscal year for this purpose, utilizing undrawn balances on the RCF.
Q: Regarding the $44 million cost savings, is there potential for further savings in FY26? A: Richard Duffy, CEO: The $44 million savings are against guidance, with $30 million in South Africa and $14 million at Williamson. While we will continue to seek efficiency improvements, we do not expect savings of the same magnitude as the $44 million, which included significant redundancies.
Q: Are there any additional questions or follow-ups? A: Richard Duffy, CEO: If there are any further questions, please direct them to Patrick Pittaway or any of us, and we will respond. Thank you for your participation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.