Petra Diamonds Reports 30% Revenue Drop in H1 FY 2024 Interim Results
Why we think this is bad
Petra Diamonds' H1 FY 2024 results reveal significant challenges, with revenue plummeting 30% to US$115 million and Adjusted EBITDA falling to US$15 million from US$38 million in the previous year. The company's financial position has weakened, with consolidated net debt rising to US$215 million and covenant breaches in its Revolving Credit Facility. An impairment charge of US$48 million at the Finsch mine further underscores operational difficulties. However, it's not all doom and gloom. The company's cost reduction measures have shown promise, with mining and processing costs down 19% and capital expenditure reduced by 32%. The improved operational free cash inflow of US$16 million, compared to a US$21 million outflow last year, demonstrates some financial resilience. Strategic moves, such as the sale of the Koffiefontein mine and the agreement to sell the Williamson mine, may help streamline operations and improve the balance sheet in the long term. Despite these positive steps, the overall financial picture remains concerning, particularly in the context of ongoing weakness in the diamond market.
Key Points
- Revenue down 30% to US$115 million
- Adjusted EBITDA decreased to US$15 million from US$38 million
- Consolidated net debt increased to US$215 million
- Mining and processing costs reduced by 19%
- Capital expenditure down 32% to US$30 million
- Operational free cash inflow of US$16 million, improved from US$21 million outflow
- Covenant breaches in Revolving Credit Facility
- Impairment charge of US$48 million at Finsch mine
- Sale of Koffiefontein mine completed, avoiding US$23 million in closure costs
- Agreement to sell Williamson mine for up to US$16 million
Summary
Petra Diamonds' H1 FY 2024 interim results paint a mixed picture of the company's performance. Revenue fell by 30% to US$115 million, while Adjusted EBITDA decreased to US$15 million from US$38 million in the previous year. The company's net debt increased to US$215 million, leading to covenant breaches in its Revolving Credit Facility. On a positive note, cost reduction measures have been successful, with mining and processing costs down 19% and capital expenditure reduced by 32%. The company also reported an improved operational free cash inflow of US$16 million, compared to a US$21 million outflow in H1 FY2024. Strategic moves, including the sale of the Koffiefontein mine and the agreement to sell the Williamson mine, aim to streamline operations. However, an impairment charge of US$48 million at the Finsch mine highlights ongoing operational challenges. The company continues to face headwinds from a weak diamond market, but is targeting net free cash flow generation from FY 2025.