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Kinross (KGC) Q2 Earnings In Line, Revenues Miss Estimates

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Kinross (KGC) Q2 Earnings In Line, Revenues Miss Estimates

Lower production and a decrease in gold equivalent ounces sold impacts Kinross' (KGC) performance in Q2.

Kinross Gold Corporation KGC reported net profit of $2.4 million or break-even earnings per share in second-quarter 2018, down from $33.1 million or 3 cents recorded in the year-ago quarter.

Barring one-time items, adjusted earnings of 3 cents per share came in line with the Zacks Consensus Estimate.

Revenues totaled $775 million, which declined 10.8% from $868.6 million registered in the year-ago quarter. The downside can be attributed to a decrease in gold equivalent ounces sold, partly offset by higher realized gold price. The reported figure missed the Zacks Consensus Estimate of $801 million in the quarter under review.

Kinross Gold Corporation Price, Consensus and EPS Surprise

Kinross Gold Corporation Price, Consensus and EPS Surprise | Kinross Gold Corporation Quote

Operational Performance

Attributable gold production was 602,049 ounces for the quarter, down 13.4% year over year. Production cost of sales per gold equivalent ounce increased to $767 from $660 recorded in the prior-year quarter. All-in sustaining cost per gold equivalent ounce sold increased to $1,018 from $910 a year ago.

Margin per gold equivalent ounce sold was $539 in the quarter, down from $600 a year ago.

Average realized gold prices was $1,306 per ounce in the quarter, up 9% from $1,260 a year ago.

Financial Review

Adjusted operating cash flow was $231.5 million, slightly up from $230.8 million in the prior-year quarter. Cash and cash equivalents were $918.7 million as of Jun 30, 2018, down from $1,061.3 million as of Jun 30, 2017.

Long-term debt amounted to $1,733.8 million, down from $1,734.5 million a year ago. The company has no scheduled debt maturities due until 2021.

Capital expenditures rose to $247.1 million from $200.7 million in the prior-year quarter. The upside was driven by higher spending at Round Mountain and Bald Mountain.

Development Updates

Kinross provided updates on the Round Mountain Phase W and Bald Mountain Vantage projects in Nevada. Both projects are proceeding well and under budget. Initial Phase W ore is likely to be encountered in mid-2019 while commissioning for the heap leach pad and processing facilities for the Bald Mountain Vantage is expected to commence in first-quarter 2019.

Construction for the Tasiast Phase One is now complete. Over the past month, throughput of the mine has continued to ramp up and peaked at 12,000 tons per day.

Outlook

Kinross has reaffirmed its production and cost outlook for 2018. The company expects gold production of 2.5 million (+/- 5%) gold equivalent ounces. Expected production cost of sales for the year has been kept unchanged at $730 (+/- 5%) per gold equivalent ounce. All-in sustaining cost is expected to be $975 (+/- 5%) per gold equivalent ounce.

For 2018, Kinross continues anticipating capital expenditures of roughly $1,075 million.

Price Performance

Shares of Kinross have lost 15.4% in the past three months, underperforming the industry’s 6.1% decline.



Zacks Rank & Key Picks

Kinross currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are KMG Chemicals, Inc KMG, CF Industries Holdings, Inc. CF and Celanese Corporation CE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5%. Its shares have returned 40.2% in a year.

CF Industries has an expected long-term earnings growth rate of 6%. Its shares have rallied 56% in a year.

Celanese has an expected long-term earnings growth rate of 10%. Its shares have gained 18.4% in a year.

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