Sierra Metals Inc reports 458% Net Income decline and 32.6 pp EBITDA Margin decline from 41.1% to 8.5%
29.03.2016 • About Sierra Metals Inc (
$SMT) • By InTwits
Sierra Metals Inc reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Sierra Metals Inc doesn't have a profitable business model yet: 2015 ROIC is -10.2%
- EBITDA Margin is quite volatile: 8.5% in 2015, 41.1% in 2014, 36.5% in 2013, 46.1% in 2012, 38.7% in 2011
- Sierra Metals Inc has high CAPEX intensity: 5 year average CAPEX/Revenue was 74.7%. At the same time it's a lot of higher than industry average of 28.7%.
- CAPEX is quite volatile: 37.6 in 2015, 39.9 in 2014, 44.0 in 2013, 33.2 in 2012, 278 in 2011
- The company has unprofitable business model: ROIC is at -10.2%
- It operates with high leverage: Net Debt/EBITDA is 4.5x while industry average is 2.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Sierra Metals Inc ($SMT) key annual financial indicators
| mln. $ | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 101.8 | 179.8 | 143.5 | 172.6 | 134.1 | -22.3% |
| Gross Profit | 60.8 | 108.8 | 75.0 | 49.0 | 7.3 | -85.0% |
| SG&A | | 6.6 | 6.2 | 8.3 | 21.2 | 157.0% |
| EBITDA | 39.4 | 82.9 | 52.4 | 70.9 | 11.4 | -84.0% |
| Net Income | -13.5 | -28.7 | -34.0 | 9.3 | -33.3 | -458.1% |
Balance Sheet
|
|---|
| Cash | 19.8 | 80.2 | 44.9 | 41.3 | 25.1 | -39.2% |
| Short Term Debt | 33.9 | 33.1 | 25.1 | 30.2 | 17.5 | -42.1% |
| Long Term Debt | 79.7 | 56.2 | 68.4 | 51.6 | 58.6 | 13.4% |
Cash flow
|
|---|
| Capex | 278.2 | 33.2 | 44.0 | 39.9 | 37.6 | -5.7% |
Ratios
|
|---|
| Revenue growth | 431.0% | 76.6% | -20.2% | 20.3% | -22.3% | |
| EBITDA growth | -11,174.6% | 110.7% | -36.8% | 35.2% | -84.0% | |
| Gross Margin | 59.7% | 60.5% | 52.2% | 28.4% | 5.5% | -22.9% |
| EBITDA Margin | 38.7% | 46.1% | 36.5% | 41.1% | 8.5% | -32.6% |
| Net Income Margin | -13.3% | -16.0% | -23.7% | 5.4% | -24.8% | -30.2% |
| SG&A, % of revenue | | 3.7% | 4.3% | 4.8% | 15.8% | 11.0% |
| CAPEX, % of revenue | 273.3% | 18.5% | 30.7% | 23.1% | 28.0% | 5.0% |
| ROIC | -2.8% | -2.0% | -6.1% | 5.1% | -10.2% | -15.3% |
| ROE | -9.4% | -12.6% | -15.7% | 4.6% | -17.7% | -22.4% |
| Net Debt/EBITDA | 2.4x | 0.1x | 0.9x | 0.6x | 4.5x | 3.9x |
Revenue and profitability
Sierra Metals Inc's Revenue dropped on 22.3% in 2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 32.6 pp from 41.1% to 8.5% in 2015.
Gross Margin dropped on 22.9 pp from 28.4% to 5.5% in 2015. SG&A as a % of Revenue surged on 11.0 pp from 4.8% to 15.8% in 2015.
Net Income marign dropped on 30.2 pp from 5.4% to -24.8% in 2015.
Capital expenditures (CAPEX) and working capital investments
Sierra Metals Inc's CAPEX/Revenue was 28.0% in 2015. The company showed CAPEX/Revenue growth of 9.6 pp from 18.5% in 2012 to 28.0% in 2015. It's average CAPEX/Revenue for the last three years was 27.3%.The company has spent a lot to CAPEX (331% of EBITDA) which didn't stop revenue from falling.
Return on investment
The company operates at negative ROIC (-10.20%) and ROE (-17.72%). ROIC dropped on 15.3 pp from 5.1% to -10.2% in 2015. ROE dropped on 22.4 pp from 4.6% to -17.7% in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 4.5x and Debt / EBITDA is 6.7x. Net Debt / EBITDA surged on 3.9x from 0.6x to 4.5x in 2015. Debt decreased on 7.1% in 2015 while cash dropped on 39.2% in 2015.
Appendix 1: Peers in Basic Materials
Below you can find Sierra Metals Inc benchmarking vs. other companies in Basic Materials industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Barkerville Gold Mines Ltd ($BGM) | | 97.4% | -90.6% | -97.6% | 84,715.6% |
| Golden Minerals Co ($AUM) | | 1,320.8% | -59.1% | -97.8% | 3,334.5% |
| Jemi Fibre Corp ($JFI) | | | | -27.3% | 375.3% |
| Osisko Gold Royalties Ltd ($OR) | | | | | 164.4% |
| VMS Ventures Inc ($VMS) | | | | | 139.7% |
| |
|---|
| Median (119 companies) | 2.8% | 8.0% | -5.0% | -1.1% | -4.0% |
|---|
| Sierra Metals Inc ($SMT) | | 76.6% | -20.2% | 20.3% | -22.3% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Royal Gold Inc ($RGL) | 68.9% | 71.5% | 70.6% | 57.6% | 86.0% |
| Nevsun Resources Ltd ($NSU) | 90.3% | 89.9% | 94.8% | 95.5% | 82.3% |
| Labrador Iron Ore Royalty Corp ($LIF) | 80.2% | 80.2% | 80.2% | 80.2% | 80.3% |
| Lucara Diamond Corp ($LUC) | | 42.5% | 57.4% | 66.7% | 60.9% |
| Perseus Mining Ltd ($PRU) | | 52.5% | 50.9% | 32.0% | 53.7% |
| |
|---|
| Median (113 companies) | 30.1% | 31.5% | 20.7% | 16.8% | 15.7% |
|---|
| Sierra Metals Inc ($SMT) | 59.7% | 60.5% | 52.2% | 28.4% | 5.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Labrador Iron Ore Royalty Corp ($LIF) | | | | | 72.8% |
| Silver Wheaton Corp ($SLW) | 84.8% | 82.6% | 75.3% | 69.6% | 65.8% |
| Royal Gold Inc ($RGL) | 86.1% | 88.2% | 88.6% | 84.4% | 65.0% |
| Franco-Nevada Corp ($FNV) | 38.6% | 62.1% | 44.6% | 72.3% | 60.8% |
| Lucara Diamond Corp ($LUC) | | 7.6% | 57.3% | 57.5% | 60.0% |
| |
|---|
| Median (119 companies) | 22.0% | 18.4% | 11.3% | 9.7% | 6.6% |
|---|
| Sierra Metals Inc ($SMT) | 38.7% | 46.1% | 36.5% | 41.1% | 8.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Silver Wheaton Corp ($SLW) | 19.4% | 75.5% | 286.8% | 22.5% | 279.2% |
| Franco-Nevada Corp ($FNV) | 9.3% | 3.7% | 35.5% | 201.6% | 230.0% |
| Avino Silver & Gold Mines Ltd ($ASM) | | 211.7% | 5.6% | 89.8% | 163.3% |
| Amerigo Resources Ltd ($ARG) | 12.9% | 13.0% | 9.3% | 9.8% | 99.6% |
| Katanga Mining Ltd ($KAT) | 48.4% | 95.8% | 86.8% | 53.7% | 81.0% |
| |
|---|
| Median (119 companies) | 23.9% | 26.3% | 25.2% | 16.0% | 15.7% |
|---|
| Sierra Metals Inc ($SMT) | 273.3% | 18.5% | 30.7% | 23.1% | 28.0% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Lucara Diamond Corp ($LUC) | -7.1% | -2.9% | 41.3% | 54.7% | 39.6% |
| Canfor Pulp Products Inc ($CFX) | 103.5% | 4.9% | 13.2% | 21.3% | 24.1% |
| Supremex Inc ($SXP) | 13.9% | 14.1% | 18.5% | 16.5% | 23.4% |
| Dynacor Gold Mines Inc ($DNG) | 45.6% | 62.8% | 50.9% | 31.3% | 18.2% |
| Western Forest Products Inc ($WEF) | 7.5% | 9.0% | 25.1% | 15.7% | 16.4% |
| |
|---|
| Median (121 companies) | 7.0% | 4.9% | 0.1% | -0.1% | -4.3% |
|---|
| Sierra Metals Inc ($SMT) | -2.8% | -2.0% | -6.1% | 5.1% | -10.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Barkerville Gold Mines Ltd ($BGM) | | | | | 38.8x |
| Copper Mountain Mining Corp ($CUM) | 17.2x | 3.9x | 5.0x | 5.4x | 30.6x |
| Resolute Forest Products Inc ($RFP) | 0.6x | 1.3x | 1.1x | 3.8x | 29.6x |
| Fortress Paper Ltd ($FTP) | 92.5x | | | | 18.8x |
| Jemi Fibre Corp ($JFI) | | | 5.5x | | 17.4x |
| |
|---|
| Median (77 companies) | -0.1x | 0.3x | 0.7x | 0.9x | 1.3x |
|---|
| Sierra Metals Inc ($SMT) | 2.4x | 0.1x | 0.9x | 0.6x | 4.5x |
