Dominion Diamond Corp Net Income dropped on 151% in 2016 and EBITDA Margin dropped on 15.3 pp from 42.9% to 27.7%
13.04.2016 • About Dominion Diamond Corp (
$DDC) • By InTwits
Dominion Diamond Corp reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Dominion Diamond Corp doesn't have a profitable business model yet: FY2016 ROIC is 0.5%
- Dominion Diamond Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 19.1%. At the same time it's a lot of higher than industry average of 24.1%.
- CAPEX is quite volatile: 210 in FY2016, 168 in FY2015, 122 in FY2014, 56.5 in FY2013, 45.2 in FY2012
- The company has potentially unprofitable business model: ROIC is at 0.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Dominion Diamond Corp ($DDC) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 290.1 | 345.4 | 751.9 | 915.8 | 720.6 | -21.3% |
| Gross Profit | 62.2 | 77.8 | 101.1 | 233.1 | 51.6 | -77.8% |
| SG&A | 24.6 | 30.2 | 47.1 | 30.5 | 41.5 | 35.8% |
| EBITDA | 116.3 | 127.9 | 191.7 | 393.3 | 199.4 | -49.3% |
| Net Income | 25.5 | 34.7 | 479.7 | 67.1 | -34.0 | -150.6% |
Balance Sheet
|
|---|
| Cash | 78.1 | 104.3 | 224.8 | 457.9 | 320.0 | -30.1% |
| Short Term Debt | 29.2 | 51.5 | 0.8 | 11.3 | 21.8 | 93.2% |
| Long Term Debt | 270.5 | 4.8 | 3.5 | 34.0 | 11.9 | -64.9% |
Cash flow
|
|---|
| Capex | 45.2 | 56.5 | 122.3 | 168.3 | 210.3 | 25.0% |
Ratios
|
|---|
| Revenue growth | -53.5% | 19.1% | 117.7% | 21.8% | -21.3% | |
| EBITDA growth | -20.0% | 10.0% | 49.8% | 105.1% | -49.3% | |
| Gross Margin | 21.4% | 22.5% | 13.4% | 25.5% | 7.2% | -18.3% |
| EBITDA Margin | 40.1% | 37.0% | 25.5% | 42.9% | 27.7% | -15.3% |
| Net Income Margin | 8.8% | 10.0% | 63.8% | 7.3% | -4.7% | -12.0% |
| SG&A, % of revenue | 8.5% | 8.7% | 6.3% | 3.3% | 5.8% | 2.4% |
| CAPEX, % of revenue | 15.6% | 16.4% | 16.3% | 18.4% | 29.2% | 10.8% |
| ROIC | 2.8% | 3.9% | 3.6% | 11.1% | 0.5% | -10.6% |
| ROE | 3.3% | 4.3% | 44.9% | 5.0% | -2.6% | -7.6% |
| Net Debt/EBITDA | 1.9x | -0.4x | -1.2x | -1.0x | -1.4x | -0.4x |
Dominion Diamond Corp ($DDC) key quoterly financial indicators
| mln. $ | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 188 | 210 | 145 | 178 | 7.0% | -24.4% | -34.8% | -26.0% |
| EBITDA | 57 | 61 | 51 | 23 | -18.4% | -44.2% | -55.4% | -76.3% |
| Net Income | 12 | -18 | 7 | -35 | -18.4% | -168.3% | -71.9% | |
Balance Sheet
|
|---|
| Cash | 368 | 344 | 328 | 320 | 73.1% | 28.5% | 13.7% | -30.1% |
| Short Term Debt | 11 | 22 | 22 | 22 | 1,282.5% | 2,494.4% | 2,530.5% | 93.2% |
| Long Term Debt | 34 | 23 | 23 | 12 | 912.3% | 629.7% | -49.4% | -64.9% |
Ratios
|
|---|
| Gross Margin | 12.9% | 10.8% | 12.7% | -7.7% | -8.7% | -9.4% | -21.2% | -33.4% |
| EBITDA Margin | 30.2% | 29.2% | 35.4% | 12.8% | -9.4% | -10.4% | -16.4% | -27.3% |
| Net Income Margin | 6.4% | -8.7% | 4.9% | -19.6% | -2.0% | -18.3% | -6.5% | -18.7% |
Revenue and profitability
The company's Revenue dropped on 21.3%. Revenue decline showed acceleration in FY16Q4 - it was 26.0% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 15.3 pp from 42.9% to 27.7% in FY2016.
Gross Margin dropped on 18.3 pp from 25.5% to 7.2% in FY2016. SG&A as a % of Revenue increased on 2.4 pp from 3.3% to 5.8% in FY2016.
Net Income marign dropped on 12.0 pp from 7.3% to -4.7% in FY2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 29.2% in FY2016. Dominion Diamond Corp showed fast CAPEX/Revenue growth of 12.8 pp from 16.4% in FY2013 to 29.2% in FY2016. It's average level of CAPEX/Revenue for the last three years was 21.3%.Dominion Diamond Corp has spent a lot to CAPEX (105% of EBITDA) which didn't stop revenue from falling.
Return on investment
The company operates at low but positive ROIC (0.45%) and negative ROE (-2.57%). ROIC dropped on 10.6 pp from 11.1% to 0.45% in FY2016. ROE decreased on 7.6 pp from 5.0% to -2.6% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is -1.4x and Debt / EBITDA is 0.2x. Net Debt / EBITDA dropped on 0.4x from -1.0x to -1.4x in FY2016. Debt dropped on 25.4% while cash dropped on 30.1%.
Management team
The company's CEO is Brendan Bell. Brendan Bell is a founder and has 4 years tenure at the company.
Appendix 1: Peers in Basic Materials
Below you can find Dominion Diamond Corp 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Golden Minerals Co ($AUM) | 1,320.8% | -59.1% | -97.8% | 3,334.5% | |
| Marlin Gold Mining Ltd ($MLN) | | | | 835.4% | |
| Mangazeya Mining Ltd ($MGZ.H) | | -22.8% | -36.5% | 230.1% | |
| Osisko Gold Royalties Ltd ($OR) | | | | 164.4% | |
| HudBay Minerals Inc ($HBM) | -22.0% | -28.6% | -8.4% | 92.8% | |
| |
|---|
| Median (117 companies) | 5.5% | -3.5% | 1.8% | -4.6% | -16.5% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Nevsun Resources Ltd ($NSU) | 89.9% | 94.8% | 95.5% | 82.3% | |
| Labrador Iron Ore Royalty Corp ($LIF) | 80.2% | 80.2% | 80.2% | 80.3% | |
| Lucara Diamond Corp ($LUC) | 42.5% | 57.4% | 66.7% | 60.9% | |
| Trevali Mining Corp ($TV) | | | 49.0% | 59.3% | |
| Mangazeya Mining Ltd ($MGZ.H) | 55.4% | 28.0% | 32.6% | 55.1% | |
| |
|---|
| Median (112 companies) | 32.1% | 21.8% | 18.0% | 15.8% | 16.4% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Labrador Iron Ore Royalty Corp ($LIF) | | | | 72.8% | |
| Silver Wheaton Corp ($SLW) | 82.6% | 75.3% | 69.6% | 65.8% | |
| Franco-Nevada Corp ($FNV) | 62.1% | 44.6% | 72.3% | 60.8% | |
| Lucara Diamond Corp ($LUC) | 7.6% | 57.3% | 57.5% | 60.0% | |
| Sandstorm Gold Ltd ($SSL) | 74.3% | 49.9% | 62.1% | 56.5% | |
| |
|---|
| Median (118 companies) | 18.6% | 10.8% | 10.6% | 5.3% | -29.8% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Largo Resources Ltd ($LGO) | | | | 567.6% | |
| Sandstorm Gold Ltd ($SSL) | 152.1% | 118.8% | 49.4% | 412.7% | |
| Silver Wheaton Corp ($SLW) | 75.5% | 286.8% | 22.5% | 279.2% | |
| Franco-Nevada Corp ($FNV) | 3.7% | 35.5% | 201.6% | 230.0% | |
| Avino Silver & Gold Mines Ltd ($ASM) | 211.7% | 5.6% | 89.8% | 163.3% | |
| |
|---|
| Median (118 companies) | 28.3% | 27.4% | 17.4% | 17.2% | 27.0% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Lucara Diamond Corp ($LUC) | -2.9% | 41.3% | 54.7% | 39.6% | |
| Canfor Pulp Products Inc ($CFX) | 4.9% | 13.2% | 21.3% | 24.1% | |
| Supremex Inc ($SXP) | 14.1% | 18.5% | 16.5% | 23.4% | |
| Mangazeya Mining Ltd ($MGZ.H) | | -3.0% | -5.0% | 23.0% | |
| Claude Resources Inc ($CRJ) | 4.5% | -5.6% | 3.6% | 19.3% | |
| |
|---|
| Median (120 companies) | 4.7% | -0.2% | 0.8% | -4.9% | -6.7% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Imperial Metals Corp ($III) | 1.5x | 4.9x | 12.9x | 67.5x | |
| Copper Mountain Mining Corp ($CUM) | 3.9x | 5.0x | 5.4x | 30.6x | |
| Resolute Forest Products Inc ($RFP) | 1.3x | 1.1x | 3.8x | 29.6x | |
| Mangazeya Mining Ltd ($MGZ.H) | 11.4x | | | 19.7x | |
| Fortress Paper Ltd ($FTP) | | | | 18.8x | |
| |
|---|
| Median (69 companies) | 0.3x | 0.9x | 1.0x | 1.6x | |
|---|
