First Quantum Minerals Net Income jumped on 240% and Revenue surged on 19.8%
14 Feb 2019 • About First Quantum Minerals (
$FQM) • By InTwits
First Quantum Minerals reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- First Quantum Minerals has high CAPEX intensity: 5 year average CAPEX/Revenue was 67.3%. At the same time it's a lot of higher than industry average of 17.7%.
- CAPEX is quite volatile: ₹29m in FY2018, ₹60m in FY2017, ₹30m in FY2016, ₹63m in FY2015, ₹37m in FY2014
- The company has potentially unprofitable business model: ROIC is 4.3%
- It operates with high leverage: Net Debt/EBITDA is 3.9x while industry average is 1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
First Quantum Minerals's Revenue surged on 19.8%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.4 pp from 24.6% to 26.0% in 2018.
Gross Margin jumped on 14.5 pp from 10.1% to 24.7% in 2018. SG&A as a % of Revenue showed almost no change in 2018. SG&A as a % of Revenue followed a declining trend at -0.39 pp per annum in 2014-2018.
Net Income margin surged on 20.7 pp from -9.5% to 11.1% in 2018. The efficient tax rate was 39.1% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 65.2% in 2018. First Quantum Minerals showed decline in CAPEX/Revenue of 7.3 pp from 72.5% in 2015 to 65.2% in 2018. For the last three years the average CAPEX/Revenue was 60.7%. To secure its fast growth First Quantum Minerals made large investments to CAPEX (154% of EBITDA). During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 56.0% and was growing since that time.
First Quantum Minerals has spent
$185m on M&A in 2018 which accounts for 4.7% of revenue.
Return on investment
The company operates at low ROIC (4.3%) and ROE (4.8%). ROIC increased on 3.3 pp from 1.1% to 4.3% in 2018. ROE increased on 8.3 pp from -3.5% to 4.8% in 2018.
Leverage (Debt)
Debt level is 3.9x Net Debt / EBITDA and 4.6x Debt / EBITDA. Net Debt / EBITDA dropped on 1.3x from 5.2x to 3.9x in 2018. Debt jumped on 12.8% while cash decreased on 3.2%.
First Quantum Minerals has questionable short term financial stability: Interest coverage ratio (ICR) is only 1.2x. First Quantum Minerals has no short term refinancing risk: cash is higher than short term debt (195.8%).
Average interest expence charged on company's debt was 8.7% in 2018.
The company paid 1.1% of Net Income as dividends in 2018.
Management team
Philip Kelvin Rodda Pascall is a the company's CEO. Philip Kelvin Rodda Pascall is a founder and has spent 23 years with the company. CEO total compensation was
$4,602,602 in 2018 which included
$1,200,000 salary and
$1,000,000 annual bonus. First Quantum Minerals's CFO Hannes Otto Meyer has spent 7 years with the company.
1.4% of the company is owned by insiders.
Financial and operational results
FY ended 31 Dec 2018
First Quantum Minerals ($FQM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 3,542 | 2,511 | 2,673 | 3,310 | 3,966 | 19.8% |
| Gross Profit | 998 | 287 | 339 | 335 | 978 | 191.9% |
| SG&A | 116 | 83 | 70 | 74 | 74 | -0.0% |
| EBITDA | 1,413 | 447 | 966 | 1,077 | 1,673 | 55.3% |
| EBIT | | | | | 809 | |
| Interest expence | | | | | 677 | |
| Tax | | | | | 283 | |
| Net Income | 835 | -496 | -45 | -316 | 441 | |
| Stock Based Compensation | | | | | 16 | |
Balance Sheet
|
|---|
| Cash | 357 | 1,178 | 1,463 | 1,296 | 1,255 | -3.2% |
| Inventory | | | | | 1,196 | |
| Short Term Debt | 53 | 1,199 | 1,283 | 910 | 641 | -29.6% |
| Long Term Debt | 5,929 | 4,675 | 4,561 | 5,961 | 7,111 | 19.3% |
Cash flow
|
|---|
| Capex | 2,893 | 1,820 | 1,497 | 2,017 | 2,584 | 28.1% |
| Dividends | | | | | 5 | |
| Acquisitions | | | | | 185 | |
Ratios
|
|---|
| Revenue growth | -0.3% | -29.1% | 6.5% | 23.8% | 19.8% | |
| EBITDA growth | 4.5% | -68.4% | 116.1% | 11.5% | 55.3% | |
|
|---|
| Gross Margin | 28.2% | 11.4% | 12.7% | 10.1% | 24.7% | 14.5% |
| EBITDA Margin | 39.9% | 17.8% | 36.1% | 32.5% | 42.2% | 9.6% |
| EBIT Margin | | | | | 20.4% |
| SG&A, % of revenue | 3.3% | 3.3% | 2.6% | 2.2% | 1.9% | -0.4% |
| SBC, % of revenue | | | | | 0.4% |
| Net Income Margin | 23.6% | -19.8% | -1.7% | -9.5% | 11.1% | 20.7% |
| CAPEX, % of revenue | 81.7% | 72.5% | 56.0% | 60.9% | 65.2% | 4.2% |
|
|---|
| ROIC | 5.5% | -0.4% | 1.6% | 1.1% | 4.3% | 3.3% |
| ROE | 9.8% | -5.3% | -0.5% | -3.5% | 4.8% | 8.3% |
| Net Debt/EBITDA | 4.0x | 10.5x | 4.5x | 5.2x | 3.9x | -1.3x |
| Interest coverage ratio (ICR) | | | | | 1.2x |
| Interest expence / Average debt | | | | | 8.7% | |
People
|
|---|
| Insider ownership | | | | | 1.4% | |
Peers in Industrial Metals & Mining
Below you can find First Quantum Minerals benchmarking vs. other companies in Industrial Metals & Mining 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 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Ezz Steel ($AEZD) | -8.9% | -14.2% | 39.3% | 80.0% | |
| Zibao Metals Recycling Hldgs Ltd ($ZBO) | | -9.0% | 23.1% | 62.8% | 6.0% |
| Magnitogorsk Iron & Steel Works ($MMK) | | -26.6% | -3.6% | 34.0% | |
| Norsk Hydro Asa ($NHY) | | 12.6% | -6.5% | 33.3% | 45.9% |
| Severstal PJSC ($SVST) | | -22.9% | -7.5% | 32.7% | 9.3% |
| |
|---|
| Median (13 companies) | 6.8% | -10.6% | -4.6% | 31.6% | 9.3% |
|---|
| First Quantum Minerals ($FQM) | | -29.1% | 6.5% | 23.8% | 19.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Mmc Norilsk Nickel ($MNOD) | 52.2% | 55.7% | 49.9% | 49.7% | |
| Severstal PJSC ($SVST) | 34.4% | 40.4% | 39.6% | 39.7% | 42.7% |
| Base Resources Ltd ($BSE) | 11.8% | 21.2% | 21.0% | 35.9% | 39.7% |
| Novolipetsk Iron And Steel Corp ($NLMK) | 28.3% | 31.4% | 33.6% | 32.5% | 36.2% |
| Magnitogorsk Iron & Steel Works ($MMK) | 21.9% | 30.6% | 32.2% | 30.2% | |
| |
|---|
| Median (11 companies) | 18.0% | 20.5% | 21.0% | 27.9% | 24.3% |
|---|
| First Quantum Minerals ($FQM) | 28.2% | 11.4% | 12.7% | 10.1% | 24.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Base Resources Ltd ($BSE) | -2.0% | 37.7% | 35.8% | 50.9% | 54.9% |
| Mmc Norilsk Nickel ($MNOD) | 46.8% | 47.0% | 46.5% | 41.2% | |
| Severstal PJSC ($SVST) | 26.4% | 32.4% | 31.2% | 32.6% | 36.1% |
| Magnitogorsk Iron & Steel Works ($MMK) | 19.5% | 28.3% | 34.5% | 26.5% | |
| Novolipetsk Iron And Steel Corp ($NLMK) | 21.8% | 24.3% | 25.4% | 26.4% | 29.8% |
| |
|---|
| Median (13 companies) | 12.6% | 14.6% | 16.8% | 18.4% | 13.6% |
|---|
| First Quantum Minerals ($FQM) | 39.9% | 17.8% | 36.1% | 32.5% | 42.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aluminium Bahrain Bsc ($ALBH) | 6.2% | 6.3% | 16.1% | 54.2% | 57.7% |
| Mmc Norilsk Nickel ($MNOD) | 10.8% | 19.0% | 20.2% | 21.2% | |
| Magnitogorsk Iron & Steel Works ($MMK) | 6.3% | 6.0% | 8.2% | 8.8% | |
| Severstal PJSC ($SVST) | 8.4% | 6.4% | 8.4% | 7.1% | 7.6% |
| Norsk Hydro Asa ($NHY) | 4.2% | 6.0% | 8.4% | 6.7% | 4.5% |
| |
|---|
| Median (13 companies) | 6.3% | 6.3% | 5.9% | 5.9% | 5.6% |
|---|
| First Quantum Minerals ($FQM) | 81.7% | 72.5% | 56.0% | 60.9% | 65.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Severstal PJSC ($SVST) | 17.7% | 30.3% | 29.7% | 38.8% | 49.5% |
| Novolipetsk Iron And Steel Corp ($NLMK) | 12.0% | 15.7% | 17.5% | 22.3% | 34.5% |
| Base Resources Ltd ($BSE) | -2.3% | 2.9% | 2.7% | 13.2% | 17.1% |
| Posco ($PIDD) | 4.4% | 3.3% | 4.0% | 6.6% | 8.0% |
| Norsk Hydro Asa ($NHY) | 5.9% | 8.7% | 6.6% | 11.8% | 7.6% |
| |
|---|
| Median (11 companies) | 9.0% | 6.8% | 5.5% | 10.1% | 7.8% |
|---|
| First Quantum Minerals ($FQM) | 5.5% | -0.4% | 1.6% | 1.1% | 4.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| OAO TMK ($TMKS) | 3.8x | 4.3x | 5.2x | 4.8x | |
| Ezz Steel ($AEZD) | 19.4x | 13.3x | 7.8x | 4.5x | |
| Aluminium Bahrain Bsc ($ALBH) | 0.4x | -0.2x | -0.1x | 2.5x | 7.4x |
| Posco ($PIDD) | 3.7x | 3.6x | 3.4x | 2.3x | 2.0x |
| Mmc Norilsk Nickel ($MNOD) | 0.6x | 1.0x | 1.2x | 2.2x | |
| |
|---|
| Median (13 companies) | 0.8x | 1.0x | 0.6x | 0.7x | 0.5x |
|---|
| First Quantum Minerals ($FQM) | 4.0x | 10.5x | 4.5x | 5.2x | 3.9x |
