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Sherritt International Corporation reported its financial results for the first quarter of 2025, revealing a net loss amid challenging market conditions. The company posted an earnings per share (EPS) of -$0.06, missing the forecasted $0.03. Revenue stood at $125.7 million, relatively unchanged year-over-year. Following the announcement, Sherritt’s stock saw a decline of 6.9% in after-hours trading, closing at $0.145. According to InvestingPro analysis, the company’s overall Financial Health Score stands at 2.28 (FAIR), with particularly concerning metrics in profitability and cash flow management.
Key Takeaways
- Sherritt missed its EPS forecast, reporting a net loss of $40.6 million.
- Revenue remained stable year-over-year at $125.7 million.
- Stock price fell by 6.9% post-earnings announcement.
- The company is advancing its Moa JV processing plant and midstream refinery projects.
- Cobalt prices have increased due to a suspension of exports from the DRC.
Company Performance
Sherritt International’s performance in Q1 2025 was marked by a significant net loss, attributed to ongoing supply chain challenges and market volatility. Despite these hurdles, the company maintained stable revenue and showed improvement in adjusted EBITDA, which rose to $4.4 million. The company is leveraging its extensive experience in Cuba to mitigate currency and economic challenges, maintaining low mining and processing costs. InvestingPro data reveals concerning metrics, including negative returns on assets (-12.2%) and weak gross profit margins. For deeper insights into Sherritt’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Financial Highlights
- Revenue: $125.7 million (unchanged year-over-year)
- Adjusted EBITDA: $4.4 million (significant improvement)
- Net loss from continuing operations: $40.6 million
- Adjusted net loss from continuing operations: $22.8 million
- Available liquidity: $55.7 million
Earnings vs. Forecast
Sherritt reported an EPS of -$0.06, falling short of the expected $0.03. This represents a significant miss, likely contributing to the negative market reaction. The revenue of $125.7 million remained stable compared to the previous year, suggesting that while revenue was steady, profitability challenges persist.
Market Reaction
Following the earnings release, Sherritt’s stock dropped by 6.9%, closing at $0.145. This decline reflects investor disappointment with the earnings miss and ongoing operational challenges. The stock’s performance was within its 52-week range, with a low of $0.125 and a high of $0.335, indicating room for potential recovery. InvestingPro analysts have set a consensus target range between $17.10 and $36.00, suggesting potential upside despite current challenges. The stock’s beta of 0.82 indicates lower volatility compared to the broader market.
Outlook & Guidance
Sherritt is optimistic about the second half of 2025, expecting increased production and benefits from higher cobalt prices. The company is maintaining its power production guidance despite a projected reduction in electricity production. Key projects, such as the Moa JV processing plant and midstream refinery, are advancing, which could bolster future performance. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels, though investors should note that analysts don’t expect profitability this year. Discover more detailed valuation metrics and 8 additional key InvestingPro Tips by subscribing to InvestingPro.
Executive Commentary
CEO Leon Binadel stated, "Although the operating conditions remain challenging, we successfully delivered on several key strategic priorities to start the year." CFO Yasmeen Gabriel highlighted financial management efforts, saying, "We reduced our debt obligations by $43 million and eliminated the $25 million premium that was payable on our second lien notes at maturity." COO Alvin Sarut added, "We expect to process increasing mixed sulfides from the ramp up of Phase two at the refinery during the fourth quarter of this year."
Risks and Challenges
- Supply chain delays continue to impact production levels.
- Market volatility in nickel and cobalt could affect pricing and demand.
- Economic conditions in Cuba present currency and operational risks.
- Lower power production due to grid support operations may impact revenue.
- Global oversupply in nickel and cobalt markets poses a competitive challenge.
Sherritt International’s Q1 2025 results underscore the difficulties faced in the current market environment, with strategic initiatives and project advancements offering potential for future growth.
Full transcript - Sherritt International Corporation (S) Q1 2025:
Conference Operator: Thank you. Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Sherrod International Corporation Q1 twenty twenty five Earnings Conference Call and Webcast. At this time, all participants are in listen only mode.
I would like to remind everyone that this conference call is being recorded today, Wednesday, 05/14/2025 at ten a. M. Eastern Time. I will now turn the presentation over to Tom Halton, Director, Investor Relations. Please go ahead.
Tom Halton, Director, Investor Relations, Sherritt International: Thank you, operator, and welcome everyone to Sherritt’s first quarter twenty twenty five conference call. We released our first quarter results last night. Our press release, MD and A and financial statements are available on our website and on SEDAR plus During today’s call, we will be referring to our presentation that is available on our website and on today’s webcast. As we will be making forward looking statements and references to certain non GAAP financial measures, please refer to the cautionary notes on Slide two of our presentation as well as the material assumptions and risks associated with certain forward looking statements and reconciliations of non GAAP measures to the most directly comparable IFRS measures included in the appendix of the presentation. On the call today is Leon Binadel, President and Chief Executive Officer Yasmeen Gabriel, Chief Financial Officer and Alvin Sarut, Chief Operating Officer.
Following a review of our results, we will open the call to questions. I will now pass the call over to Leon.
Leon Binadel, President and Chief Executive Officer, Sherritt International: Thank you, Tom, and good morning, everyone, and thanks for joining us. I’ll be starting on Slide four with a summary of developments during the quarter that led to the price volatility in nickel and cobalt markets. To start the year, nickel prices climbed on reports that Indonesia was considering cutting the nickel mining quotas for the year to 150,000,000 tons, a sizable year over year decrease. In late January, the twenty twenty five quota was announced with a significant year over year increase causing nickel prices to trend lower. The following month, in early February, reports emerged indicating that the Philippine government was considering banning nickel ore exports.
Again, the rise in nickel price was short lived after it became apparent that the potential ban would not take effect for at least five years. While government interventions have yet to provide any sustained support for nickel prices, government action positively impacted cobalt prices. In late February, the DRC suspended cobalt exports for four months, forcing producers to stockpile cobalt until exports are permitted again. Subsequently, the government indicated that the export ban may be extended and that it may partner with Indonesia to impose export quotas to manage global cobalt supply and pricing. With the DRC accounting for over three quarters of the global cobalt production, prices significantly increased late in the quarter.
As such, we did not benefit from it in Q1 financial results. However, we expect to see benefits in the second quarter with the average reference price having increased more than 35% from $12.84 per pound in the first quarter to $17.5 per pound in the first half of the second quarter so far. Looking ahead, while the global oversupply of nickel and cobalt remains and tariff uncertainty may pose additional challenges, further government interventions could be significant catalysts for higher pricing by curtailing excess supply. Turning to Slide five. Providing a backdrop to our operating results, I would like to share an update on the operating environment in Cuba, which became more difficult during the quarter.
Escalating U. S. Pressure with restrictions on travel and remittances to Cuba, combined with lower tourism, has led to a decline in Cuba’s access to foreign currency. Our years of experience in managing currency challenges in Cuba have helped us mitigate many of the associated risks. Our Moa joint venture generates foreign currency earnings and the Moa swap agreement mitigates currency risk at Energas, but there are indirect impacts that we still face from the broader economic environment in Cuba.
During the first quarter, we saw lower production of mixed sulfides in part due to these negative indirect impacts. Having operated in Cuba for over thirty years, we have a successful track record of overcoming various adversities. We are currently working with our partners and the Cuban government as part of our usual course of engagement to further insulate and enhance protections to the Moa JV from the broader domestic supply chain and power disruptions stemming from the impacts of the foreign currency limitations. Now turning to operating results. As we guided last quarter, we started the year with low inventory of mixed sulfides at the refinery.
Given the low inventory, we expect our finished nickel and cobalt production to be weighted towards the second half of the year. We will also start to benefit from the increase of mixed sulfide production being delivered to the refinery in the fourth quarter with a ramp up phase of Phase two of the Mojo JV expansion, which is non commissioning. Amid the depressed nickel price environment, we are closely managing our costs. Our net direct cash cost was 18% lower year over year as we maintained low mining processing refining cost per pound, reduced our third party feed cost and benefited from higher byproduct credits. In power, the Veradero facility continues to operate in frequency control to support the Cuba National Grid.
This is contributing to lower electricity production this year, but InnoGas continues to be fully compensated for this reduction. We also saw lower gas availability during the quarter from a legacy Cupid well. However, this was partly offset by a new well brought online during the fourth quarter of last year. Finally, Yasmin will go into more detail on the financial results, but we are pleased to have successfully closed the transactions to strengthen our capital structure and extend our note maturities, providing Sherritt with significant runway to navigate through the current nickel and cobalt price downturn. I’ll now turn over the call to Alvin to provide more details on our first quarter operational performance.
Alvin Sarut, Chief Operating Officer, Sherritt International: Thank you, Leon. Turning to Slide seven for the results from our metals business. As Leon mentioned, mixed sulfide production was lower primarily due to supply chain delays, maintenance to the ore thickener and lower mining equipment availability. There was another national wide power outage in Cuba, which we again partially mitigated by our plant sites power generation generating capacity. With the low inventory at the refinery to start the year and lower production of mixed sulfides in the quarter, finished nickel and cobalt production were lower as expected.
As per our guidance, we expect production to be higher in the second half of the year, but we are continuing to see sufficient demand driving nickel sales above production volumes. Fertilizer production was slightly lower, consistent with lower nickel production, but sales were strong on particularly high demand ahead of the spring planting season. Now turning to Slide eight for NDCC, our net direct cash costs. First quarter NDCC was $5.95 per pound of nickel sold, decreasing 18 year over year. We continue to focus on cost containment and maintain low mining, processing and refinery costs per pound during the quarter, while benefiting from higher net fertilizer and other byproduct credits.
We also processed less third party feed contributing to our lower cost performance. Now to our joint venture expansion update on Slide nine. During the quarter, we began commissioning Phase two, the processing plant. We are still expecting ramp up in the second half of the year. In anticipation of that, our Moa joint venture team is continuing work on removing minor processing bottlenecks.
We have some incremental capital spend associated with Phase two remaining, and we expect that to be incurred along with our commissioning activities as all remaining spend has now been committed. This project remains on budget. We still expect to process increasing mixed sulfides from the ramp up of Phase two at the refinery during the fourth quarter of this year, leading even to higher finished nickel and cobalt production in 2026. Slide 10 provides an update on our power business. Power production was lower this quarter as the Veradero facility operated in frequency control to support the national grid.
Inner Gas expects Veradero will operate in frequency control throughout most of 2025, reducing shared attributable electricity production by about 150 gigawatt hours, which was factored into our guidance for power announced at the start of the year and which Energas will be fully compensated for. In addition, there was lower gas availability due to mechanical issue with the bottom hole pump in one of Cuphead’s legacy gas wells, which affected its ability to remove water effectively. Cuphead is actively working on a solution to restore gas production from this well. Partially offsetting this is the new well brought into production during the fourth quarter of last year. We forecast higher electricity production for the remainder of the year and we maintain our production guidance.
Finally, the national wide power outage in March led to some downtime at Innergas’ Boca and Veradero facilities, but this did not have a material impact on electricity production. Energas continues to play an important role in helping to quickly restore power and stabilize the national grid during these outages. Unit operating costs were higher during the quarter as expected, primarily due to planned maintenance as we completed a major inspection on a gas turbine and the impact of the lower electricity production from the Varadero facilities operating in frequency control and reduced gas availability for the Boca facility. With the maintenance complete, we expect costs to trend lower and fall within our annual guidance of $23 to $24.5 per megawatt hour. I will now turn the call over to Yasmin for the financial results.
Yasmeen Gabriel, Chief Financial Officer, Sherritt International: Thanks, Melvin. I’ll begin with our financial performance on Slide 12. The average realized price of nickel was relatively unchanged year over year, but sales volumes were lower in line with nickel production, resulting in lower nickel revenue. Cobalt revenue was modestly higher as the lower average realized price was more than offset by higher sales volumes as we sold the remaining cobalt we received under the cobalt swap agreement at the end of last year. Looking ahead to next quarter, we expect to benefit from the higher average realized cobalt prices, which are currently 35% higher in the second quarter compared to Q1.
Our fertilizer performance in Q1 was particularly strong with 39% higher sales volumes from strong demand and 16% higher average realized prices. Combined revenue of $125,700,000 which includes revenue from the Moa joint venture on a 50% basis in which more holistically reflects our performance was relatively unchanged year over year as higher fertilizer revenue offset the lower revenue from nickel sales and power generation. We remain committed to cost containment and operational efficiencies. The cost optimizations implemented last year are beginning to yield benefits, positively contributing to our adjusted EBITDA of $4,400,000 for the quarter, representing a significant year over year improvement. Net loss from continuing operations was $40,600,000 adjusted net loss from continuing operations was $22,800,000 and excludes $15,700,000 noncash loss on rehabilitation provisions as a result of updates to cost and valuation assumptions for rehabilitation and closure costs on legacy oil and gas assets in Spain.
Turning now to liquidity on Slide 13. We ended the quarter with $55,700,000 of available liquidity in Canada. During the first quarter, key changes in liquidity included $12,800,000 from spring season fertilizer presales, 6,100,000.0 from the sale of cobalt received under the cobalt swap agreement in Q4 of last year, ’4 point ’3 million is dividends from Energas, five point nine million in payments on contractually obligated rehabilitation and closure costs related to legacy oil and gas assets in Spain, Three Point One Million in payments for property, plant and equipment and $2,600,000 in transaction fees related to the debt and equity transactions. Looking ahead for the balance of 2025. Assuming current metal prices and in line with our expectations for nickel and cobalt production to be weighted toward the back half of the year, similar to last year, we anticipate distributions under the cobalt swap in the second half of the year and that distributions will not meet the annual minimum amount.
We continue to expect higher levels of dividends in Canada from Energas this year. Last year, we received CAD13 million and this year we are expecting to receive between 25,000,000 to $30,000,000 On a quarterly basis, we expect these dividends to increase from the $4,300,000 we received in Q1, which was lower in part due to the planned maintenance in the quarter, which is now complete. Now turning to Slide 14. In early twenty twenty four, we were proactively reviewing potential strategic opportunities transactions to improve Shared’s capital structure, address the second lien notes maturity in 2026 and strengthen Shared’s overall financial position to benefit the company and all its stakeholders. We are pleased to have successfully completed transactions in April, which achieved these objectives, marking a significant milestone in our efforts to strengthen our capital structure.
The debt transaction exchanged $292,000,000 of second lien and PIK notes for $266,000,000 of amended senior secured notes. Upon completion, certain note holders agreed to exchange a portion of their amended senior secured notes for 99,000,000 newly issued common shares at $0.01 $73 per share, a premium to market prices at the time of the transaction and further reducing our debt by 17,000,000 As a result of these transactions, we have unlocked substantive benefits that will drive significant value. We reduced our debt obligations by $43,000,000 and eliminated the $25,000,000 premium that was payable on our second lien notes at maturity, resulting in more than 20% reduction in debt. We extended our debt maturity date of six years to November 2031. We reduced our annual interest expense by approximately 3,000,000 and we eliminated the compounding impact on the PIK notes.
We expect to recognize an approximate $33,000,000 gain on these debt and equity transactions in Q2, which represents the difference between the amortized cost of the old debt and premium on the second lien notes that was eliminated and the fair value of the new debt plus accrued interest on the PIK notes less transaction costs. With these transactions complete, we have not only addressed the previous 2026 maturity of the second lien notes, but have also established a strengthened capital structure to withstand the current lower nickel price environment and position the company for future growth and value creation. That concludes my comments and I’ll turn it back to Leon.
Leon Binadel, President and Chief Executive Officer, Sherritt International: Thank you, Yasmin. I’ll conclude on Slide 16. Although the operating conditions remain challenging, we successfully delivered on several key strategic priorities to start the year. We strengthened our balance sheet, as Yasmin outlined, significantly reducing outstanding debt obligations and interest expense, while extending our debt maturities to over six point five years from now. We started commissioning our Phase two of our Moa JV expansion program.
We expect ramp up in the second half of this year, increasing our annual production of mixed sulfide precipitate and filling the refinery with a feed from Moa JV to maximize profitability. Leveraging our differentiated technical processing expertise, we also advanced our midstream refinery or MHP project focused on developing new refining capacity for the EV supply chain. Our focus in the near term on commercial and financing arrangements for this project. Completion of these milestones will enable us to deliver near term growth and substantial long term value creation. Looking ahead for this year, we see near term benefit from the higher cobalt prices and our expectation for stronger production and operating results in the second half of the year.
I’d also like to conclude and thank our employees for their dedication, and they’re doing an amazing job on a very challenging environment. And operator, I’d like now to open the call for questions.
Yasmeen Gabriel, Chief Financial Officer, Sherritt International: Thank
Conference Operator: There are no questions at this time. I will now turn the call over to Tom for closing remarks.
Tom Halton, Director, Investor Relations, Sherritt International: All right. Thank you, operator. If anyone has any questions, please feel free to reach out and thank you for joining us today and your continued support.
Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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