OZ Minerals Ltd (ASX: OZL) released their full-year report for 2018 this morning, a profit drop but a hefty fully franked dividend.

OZ Minerals was formed in 2008 through the merger of two mining businesses; Oxiana and Zinifex. Now based in Adelaide, OZ Minerals predominantly operates in the copper and gold mining sector through their copper-gold mine at Prominent Hill.

5 Takeaways From The Oz Minerals Report

  • Net revenue increased 9.1% to $1,117 million
  • Underlying EBIT fell by 2.7% to $311.9 million
  • Underlying NPAT fell 1.2% to $228.3 million
  • Earnings per share went down 7.6% to 71.5 cents per share (cps)
  • Total dividend for 2018 was 23 cps, fully franked

Analyst Targets

Bloomberg analyst targets for net profit (NPAT) were $200.67 million, but Bell Potter targets were higher with the consensus estimate being $235.13 million. OZ Minerals fell between these ranges, but they did beat dividend estimates by more than 13%. The estimate, from Bloomberg, was 20.2 cents per share.

Growth Drivers

Although profit was marginally lower than the prior year’s result, Oz Minerals noted that an additional $46 million was spent on “progressing growth projects”. On top of this, EBIT was slightly lower, but EBITDA was slightly better than the previous year with a margin of 48%.

OZ Minerals reported that their Prominent Hill facility saw higher sales volumes than in previous years, but the result was hurt by weaker copper prices in the second half.

Management Commentary

OZ Minerals Chief Executive Officer Andrew Cole said, “Another strong and reliable performance at Prominent Hill in 2018 has allowed us to invest in our copper-focused growth strategy and deliver a net profit after tax of $222 million on increased revenue of $1,117 million.”

Commenting on cash flow, he noted, “Operating cash flows of $450 million were up 31% on the prior year and with a cash balance of $505 million, the financial position of the company remains robust.”

On the topic of sustainability, Mr Cole had this to say: “How we do things – operating safely and environmentally responsibly, ensuring we are ethical, well=governed and are socially responsible – is critical to achieving our cultural, operational and financial aspirations. To that end, we are progressively revising our sustainability approach in advance of emerging trends and community expectations”.

Outlook

For 2019, Oz Minerals’ copper production is expected to be in the range of 97,000-109,000 tonnes, compared to 110,111 tonnes in 2018. Gold production is also expected to be lower, in the range of 118,000-131,000 ounces, compared to 130,856 ounces in 2018. OZ Minerals is also expecting to spend more on exploration and “project studies” this year as a focus to drive growth.

If you’re considering investing in OZ Minerals, you might also consider companies such as Codan Ltd (ASX: CDA)or Iluka Resources Ltd (ASX: ILU), both of which I’ve recently written about on Rask Media:

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.