Industrias Peñoles (PE&OLES) Q2 2024 earnings summary

Executive summary

• Net sales rose 6.3% year-over-year in 2Q'24 to US$1,634.5 million, driven by higher metal prices for gold (+20.3%), silver (+18.8%), zinc (+14.0%), and copper (+15.2%), offsetting lower volumes, especially refined gold.

• Operating profit surged to US$223.5 million in 2Q'24 from US$30.6 million in 2Q'23, reflecting improved gross profit and lower costs.

• EBITDA increased 117.8% year-over-year to US$420.9 million in 2Q'24, with a 38.9% rise for the first half of 2024.

• Despite operational improvements, the quarter ended with a net loss of US$23.2 million, reversing a net income of US$22.3 million in 2Q23, due to higher tax provisions and deferred tax impacts from peso depreciation.

Financial highlights

• Gross sales reached US$1,634.5 million in 2Q'24, up 6.3% from 2Q'23; YTD sales at US$3,031 million, up 2.8%.

• Cost of sales decreased 6.4% year-over-year in 2Q'24, aided by inventory credits and lower third-party material costs.

• Operating expenses fell 5.8% due to reduced exploration and administrative costs.

• Cash and equivalents stood at US$1,245.9 million at quarter-end; financial debt at US$2.9 billion as of June 2024.

• Cash flow from operations was US$521.3 million YTD, up 44% from the prior year.

Outlook and guidance

• Management continues to focus on optimizing working capital and production efficiency, with ongoing inventory reduction programs.

• Equipment repairs and design corrections at the zinc plant are expected to limit capacity until completion.

• Mining at San Julián (DOB) is expected to be suspended in 3Q24 as it nears the end of its productive life.

• Exploration continues on priority projects in Mexico, Chile, and Peru, with ongoing drilling and resource evaluation.