Cigna earnings beat by $0.04, revenue topped estimates
Sherritt International Corporation, with a market capitalization of $6.2 billion, reported its second-quarter 2025 earnings, falling short of EPS expectations. The company reported an EPS of -$0.06, missing the forecast of -$0.05. Despite this, the company achieved a combined revenue of $135.6 million, contributing to its trailing twelve-month revenue of $864.1 million. Following the earnings release, Sherritt’s stock saw a decline of 3.45% in after-hours trading, reflecting investor concerns over the earnings miss and revised production guidance. According to InvestingPro analysis, the stock currently appears undervalued based on its Fair Value assessment.
Key Takeaways
- Sherritt reported a second-quarter EPS of -$0.06, missing the forecast by $0.01.
- The company’s revenue for the quarter was $135.6 million, with nickel revenue declining.
- Stock price decreased by 3.45% following the earnings announcement.
- Revised production guidance for nickel and cobalt indicates lower anticipated output.
Company Performance
Sherritt International Corporation faced a challenging second quarter, with notable declines in nickel revenue due to a 15% drop in average realized prices and a 14% decrease in sales volumes. In contrast, cobalt revenue saw a positive uptick with a 27% increase in average realized prices. The company ended the quarter with $45 million in available liquidity, despite reporting a net earnings loss from continuing operations.
Financial Highlights
- Revenue: $135.6 million
- Earnings per share: -$0.06 (vs. forecast of -$0.05)
- Net earnings from continuing operations: $10.4 million
- Adjusted net loss from continuing operations: $25.6 million
Earnings vs. Forecast
Sherritt’s actual EPS of -$0.06 fell short of the forecasted -$0.05, marking a 20% negative surprise. This miss is significant compared to previous quarters, where the company had aligned more closely with market expectations.
Market Reaction
Following the earnings announcement, Sherritt’s stock price dropped by 3.45%, closing at $0.14. This decline positions the stock closer to its 52-week low of $0.125, with a year-to-date return of -15.81%. The stock’s current price represents a 63% decline from its 52-week high of $29.29, indicating investor apprehension about the company’s performance and revised production guidance. InvestingPro’s comprehensive analysis, including detailed Fair Value calculations and financial health scores, helps investors make informed decisions in challenging market conditions.
Outlook & Guidance
Sherritt revised its 2025 production guidance, reducing the expected output for nickel to 27-29,000 tonnes and cobalt to 3,000-3,200 tonnes. Despite these reductions, the company anticipates starting cobalt swap distributions in Q4 2025 and expects power production to reach the lower end of its 800-850 gigawatt-hour range.
Executive Commentary
CEO Leon Binadel stated, "We have taken significant actions that we expect to increase metal production, lower our cost and improve margins." CFO Yasmin Gabriel added, "These actions together reflect our proactive response to current and anticipated market conditions."
Risks and Challenges
- Nickel market faces multi-year low reference prices and potential supply constraints due to new Indonesian regulations.
- Cuban operations are challenged by U.S. pressure, power grid instability, and supply chain constraints.
- Revised production guidance suggests potential revenue impacts.
Q&A
The earnings call experienced a technical disconnection, limiting the Q&A session. One analyst, Tony Robson, attempted to inquire about Cuban operations and future production, highlighting ongoing concerns in these areas.
Full transcript - Sherritt International Corporation (S) Q2 2025:
Conference Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Scherer International Corporation Second Quarter of twenty twenty five Earnings Conference Call and Webcast. At this time, all participants are in listen only mode. I would like to remind everybody that this conference call is being recorded today, Wednesday, 07/30/2025 at 10AM Eastern Standard Time. I would now turn the call over to Mr.
Tom Halton, Director, Investor Relations. Please go ahead.
Tom Halton, Director, Investor Relations, Sherritt International: Thank you, operator, and welcome, everyone, to Sherritt’s second quarter twenty twenty five conference call. We released our second 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, Executive Chairman, President and CEO Yasmin Gabriel, Chief Financial Officer and Alban Saruk, Chief Operating Officer and Head of Cuban Operations.
Following a review of our results, we will open the call to questions. It is now my pleasure to pass the call over to Leon.
Leon Binadel, Executive Chairman, President and CEO, Sherritt International: Thank you, Tom, and good morning everyone and thank you for joining us. I’ll begin on Slide four with a summary of our second quarter results. At the start of the year we guided that our finished nickel and cobalt production would be weighted towards the second half given the low opening inventory of mixed sulfides at the refinery. Although we anticipated lower results in the first half of the year, mixed sulfide production at Moa has not tracked to our expectations as a result of more challenging operating conditions in Cuba following the renewed maximum pressure policies from The U. S.
On Cuba under the new administration. In response we formed a task force and have been working with our Cuban partners to develop and implement a recovery plan with several initiatives already underway. In addition to the expected improvements from these actions, the ramp up of Phase two of the Moa JV expansion will increase mixed sulfide production with higher MSP starting to be delivered to the refinery in the fourth quarter. Despite production being lower than we anticipated, we continue to effectively manage our costs with our net direct cash cost 8% lower year over year. We maintained low mining, processing and refining cost per pound and benefited from higher byproduct credits.
In Power, the Veradero facility continued to operate in frequency control to support the Cuba national grid. This is contributing to lower electricity production this year, but Energas continues to be fully compensated for this reduction. We also saw lower gas availability during the quarter from a legacy Cupid well that was compromised. However, this was partially offset by the new well we brought online during the fourth quarter last year and increased supply from other wells. Lastly, we are pleased to have successfully closed the debt and equity transactions this quarter to strengthen our capital structure and extend the note maturities providing Sherwood with more than six year runway to navigate through the current nickel price downturn.
Turning to slide five, in response to the lower nickel price environment and materially reduced short to medium term pricing forecasts, we’ve implemented further significant cost reductions expected to yield $20,000,000 in annual savings which Yasmeen will provide more details on in a moment. The average nickel reference price reached multi year lows during the second quarter. We continue to monitor government actions that may result in more favorable pricing dynamics for nickel in the future. The Indonesian government’s imposition of sanctions on nickel companies for environmental violations underscores a shift towards stricter regulatory enforcement which could curtail supply growth and increase production costs thereby reducing Indonesia’s cost competitiveness. Additionally, the decision to revert to one year mining quotas for 2026 from the previously issued three year quotas at the start of this year is indicative of further intention by the Indonesian government to actively intervene and maintain a market balance in nickel.
While we are not counting on high nickel prices any meaningful increase will greatly in prices would benefit Charette through both significant margin expansion and high cobalt swap distributions. Notably we are seeing higher prices for third party feeds due to high Chinese payabilities for intermediate feeds which also reflect increased producer price cost pressure. Turning to the cobalt market, prices remained elevated during the second quarter following the DRC’s announcement in June to extend the cobalt export restrictions for an additional three months through to September. Reports indicate that a potential shift to a quota system are being considered as the DRC seeks to support prices by limiting exports. While government officials have expressed a commitment to maintaining a balanced market, any further measures such as additional controls or quotas could offer a continuation of the price support we are experiencing.
I will now turn the call over to Alvin to provide more details on our operational performance.
Alban Saruk, Chief Operating Officer and Head of Cuban Operations, Sherritt International: Thank you, Leon. Turning to slide seven for our results from metals. As Leon mentioned, mixed sulfide production in Moa is lower, impacted primarily by the operating environment in Cuba, which has become increasingly difficult as a result of escalating U. S. Pressure.
Power grid stability remains a concern with periodical blackouts and rolling brownouts. The government has prioritized improving power generation and is actively pursuing measures to address this. At Moa, we have our own power generation capacity, which enables the plant to continue operations at a reduced rate during the country’s power outages. Supply chain challenges are continuing, especially concerning certain critical input commodities. We have a history of navigating these challenges successfully and are actively working to reinforce certain safeguards for the Moa joint venture.
We are also encountering constraints in the availability of specialized labor contributing to increased maintenance downtime and lower equipment availability. To mitigate this, we are providing additional ex pat personnel at both the plant and the mine site to ensure the technical expertise and decreasing the downtime from unplanned maintenance. We are also expecting mine loading equipment deliveries during the third quarter for the ramp up of the mine to support Phase two of the expansion. This new equipment will also contribute to improved availability. In addition to these factors, during the quarter, we had planned maintenance at the Moa Asset plant.
Normally, would purchase asset to replace the loss from the shutdown to maintain production of mixed sulfides, but the purchase price was uneconomic. As a result, we saw approximately 1,000 tonnes lower MSP production at Moa from this decision. At the refinery, finished nickel and cobalt production has been impacted by the lower availability of mixed sulphides from Moa. We processed some third party feed we acquired earlier, but we are seeing limited opportunity to acquire additional profitable third party feed for the balance of the year. Finally, on fertilizers, sales volumes were lower year over year due to timing of purchases, which was significantly higher in Q1 this year compared to last year and lower customer demand in part due to seeding in Western Canada occurring earlier this year.
Now turning to Slide eight on our net direct cash cost or NDCC. Second quarter NDCC was US5.27 dollars per pound of nickel sold, decreasing 8% year over year. We maintained strong cost control, further reducing mining, processing and refining costs per pound of nickel sold despite the lower production volumes. We also benefited from lower maintenance costs with the annual refinery maintenance shutdown scheduled for the third quarter this year as compared to the second quarter in the prior year. In addition to this, higher cobalt and fertilizer byproduct credits offset higher third party feed costs we incurred, in part due to the higher Chinese payables for intermediate feeds as Leon mentioned earlier.
This underscores the rationale for our Moa joint venture expansion strategies, which will reduce our reliance on lower margin third party feeds and allow us to sell our excess MSP production in the future. Now turning to Slide nine for an update on the Moa joint venture expansion. During the quarter, commissioning activities for Phase two of the Moa joint venture expansion continued as planned. Completion is scheduled for mid August with the ramp up set to commence thereafter, and we expect to start processing more mixed sulfides at the refinery in the fourth quarter of this year. The project remains on budget.
Now turning to Slide 10 for an update on the Power business. Power production was lower this quarter as we expected with the Veradero facility operating in frequency control to support the national grid. Energas expects Veradero will operate in frequency control throughout most of 2025, reducing shares attributable electricity volume by approximately 150 gigawatt hours, which was factored into our guidance for power announced at start of the year and which Energas will be fully compensated. In addition, production was lower due to a legacy Cupid gas well, which experienced an increase in water production in the first quarter of this year. Cupid is actively working on a replacement well, which is currently being drilled and will go into production in September.
The decrease in gas supply during the quarter was partially offset by increased gas supply from other wells. As for unit operating costs, they were lower during the quarter as expected, primarily due to lower planned maintenance with one major inspection of a gas turbine completed earlier this year during first quarter, whereas in 2024, there were two major gas turbine inspections in the second quarter. Finally, on Slide 11 for an update on our 2025 guidance. At Metals, with the operating challenges in Cuba resulting in lower mix sulfide production and limited ability to supplement with third party feeds, we are updating our guidance for 2025. We revised our guidance range for nickel production from 31,000 to 33,000 to now being 27,000 to 29,000 tonnes.
And for cobalt production from 3,300 to 3,600 to now be 3,000 to 3,200 tonnes. During the quarter, made a few strategical decisions. When faced with the option to procure costly uneconomic sulfuric acid and third party fees to achieve production targets, we chose instead to safeguard our margins and liquidity. As a result, while our approach supported our margins and liquidity, it has also contributed to the revision in our metals production guidance for the year. We are also updating our guidance for our spending and capital after finding opportunities to defer or reduce spending.
As a result, 2025 guidance for sustaining capital metals has been reduced from $35,000,000 to $30,000,000 and the tailings facility spending has been reduced from $40,000,000 to $35,000,000 The deferral of the 2025 spending on new tailings facility does not change the overall project budget or completion timeline. At Power, we are maintaining our guidance range for electricity production, but we expect it to be closer to the lower end of the 800 to eight fifty gigawatt hour range, primarily due to the loss in gas production from the CubeSat legacy well, which is expected to be replaced by the new well in September. NDCC and unit operating cost guidance in Metals and Power as well as spending on capital in Power all remain unchanged.
Yasmin Gabriel, Chief Financial Officer, Sherritt International: I will now turn the call over to Yasmin for the financial results. Thanks, Alvin. I’ll begin with our financial performance on Slide 13. Combined revenue of $135,600,000 which includes revenue from the Moa joint venture on a 50% basis and which more holistically reflects our performance was lower year over year primarily driven by lower nickel revenue. Nickel revenue declined year over year due to a 15% decrease in average realized price and a 14% decrease in sales volumes driven by lower production.
Cobalt revenue increased from a 27% improvement in the average realized price, which more than offset the marginally lower sales volume. Fertilizer revenue was lower primarily due to the timing of sales with increased demand in Q1 and the spring planting season in Western Canada ending earlier this year. The lower sales volume was partially offset by a 17% higher average realized price. We continue to pursue cost containment and operational efficiencies, which I’ll touch on in a moment and we expect these initiatives to help contribute to improvements to adjusted EBITDA going forward. Net earnings from continuing operations was 10,400,000 Adjusted net loss from continuing operations was $25,600,000 and primarily excludes a $32,400,000 gain related to the debt and equity transactions completed during the quarter.
Turning now to liquidity on Slide 14. We ended the quarter with $45,000,000 of available liquidity in Canada. Key changes in liquidity during the quarter included $5,600,000 of dividends from Energas in Canada, 10,300,000.0 in fees related to the debt and equity transactions, 8,700,000.0 of interest on second lien notes, 6,200,000.0 on contractually obligated rehabilitation and closure costs related to legacy oil and gas assets in Spain and $4,400,000 in property, plant and equipment expenditures. We also had positive cash from operating activities at our other business units, which primarily reflected timing of working capital receipts and payments. Finally, during the quarter, we extended the maturity of our revolving term credit facility to 04/30/2027, with no other significant changes to the terms, financial covenants or restrictions.
Looking ahead for the balance of 2025, at Metals, based on current spot nickel prices and revised 2025 guidance, we expect that distributions under the cobalt swap agreement will be limited, commence in Q4 twenty twenty five and will not meet the annual minimum amount in 2025. At Power, based on 2025 guidance, which includes electricity production that is expected to be at the lower end of the guidance range, we anticipate total dividends from Energas in Canada to be at the lower end of its previously disclosed range of $25,000,000 and $30,000,000 Now, turning to slide 15. In response to persistently low nickel prices and expectations of materially lower short to medium term pricing outlook, coupled with ongoing challenges with the operating environment in Cuba, we have implemented significant cost reduction measures to deliver approximately $20,000,000 in annualized savings. This is in addition to the $17,000,000 in annualized savings from the cost reduction initiatives implemented last year. Since 2021, we have pursued rigorous cost optimization measures, including a 10% workforce reduction in the corporate office in May 2021, a 10% workforce reduction across Canadian operations in January 2024 and a further 10% workforce reduction at the corporate office during the second quarter in twenty twenty four.
The executive management team has also been streamlined from seven members at the start of twenty twenty four to five members currently. These actions together with ongoing efforts to identify further cost optimization opportunities reflect the organization’s proactive response to current and anticipated market conditions and demonstrate our commitment to building a leaner, more resilient organization capable of weathering challenging market conditions while continuing to manage and mitigate the risk associated with our operations. I’ll now turn it back to Leon for closing remarks.
Leon Binadel, Executive Chairman, President and CEO, Sherritt International: Thank you, Alvin and Yasmin. And concluding on Slide 17, although both the nickel pricing environment and operating conditions have been challenging, we have taken significant actions that we expect to increase metal production, lower our cost and improve margins, all of which will strengthen our performance going forward. Our dedicated task force has developed and begun implementing a recovery plan to address the operating challenges in Cuba. The Moa JV expansion is on track to complete commissioning in mid August with ramp up scheduled to commence later in the quarter. We expect Energas to benefit from Cuba’s replacement gas well coming online in September.
We closed our debt and equity transactions, strengthening our balance sheet, reducing our outstanding debt obligations, decreasing our interest expense and extending our principal maturity date to late two thousand thirty one and extended our credit facilities to April 2027. These efforts combined with our latest significant cost reduction initiative that Yasmin elaborated on position us well to mitigate the low nickel price environment with resilience. Now operator, I’d like to open the call to questions.
Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. So at this time, there are no further questions. I will now turn the call back over to Mr. Tom Halton for closing remarks.
Please go ahead.
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 all for joining us today.
Conference Operator: We do have a question from Tony Robson from Global Mining Research. You may go ahead.
Tony Robson, Analyst, Global Mining Research: Thank you. Thank you for the presentation. Apologies, fat fingers here. The it sounds like you’re being hit in the Cuban operations sort of a triple whammy, lack of workers therefore need to bring in expats, lack of third party feed and sulfuric acid prices, which was mentioned briefly in the call. So two questions here.
What’s sulfuric acid prices looking like do you think for the rest of this year? And secondly, given your reduced guidance by about 4,000 tonnes taking the midpoints for this year, what is the read through please for 2026? Where we thought I guess the expansion was going to add about I think from my notes 6,500 tonnes of MSP on the expansion. Do you think
Conference Operator: Toni, do apologize. Do I do think the host actually did disconnect the call. What I will remind is as of what they did advise, any further questions you can reach out to them on their website. But unfortunately they did leave the call.
Tony Robson, Analyst, Global Mining Research: Not a problem. I hit the wrong numbers buttons on my phone. So my fault, yours. Thank you very much for your time.
Conference Operator: I hope you have a great day and thank you for joining the conference. Enjoy your day, guys.
Leon Binadel, Executive Chairman, President and CEO, Sherritt International: Thank you. Bye.
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