Newcrest Mining (ASX:NCM) trims interim dividend on squeezed profits

Australia’s gold and copper mining behemoth, Newcrest Mining Limited (ASX:NCM), has trimmed down its interim dividend by 50% to US$0.075 per share due to a surprising fall in its 1H FY22 profits.

In its FY22 half-year results announced on Thursday, the miner reported a 46% drop in the net profit for the six-month period. The net profit dipped primarily due to lower gold and copper production volumes along with higher operating costs. The miner also faced challenges in the form of high freight and labour costs.

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Operational Summary

Newcrest’s group gold and copper production stood at 832,298oz and 50,945t for the six-month period ending on 31 December 2021. The lower production at Lihir dragged down overall production levels.

Source: © Utah778 | Megapixl.com

Operating costs during the half year were also impacted by labor and consumable cost pressures due to rising demand.

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COVID-19 Impacts

Several project activities have experienced some disruptions with the company focusing on minimising any impact on costs and schedule. NCM has spent nearly AU$32 million towards managing COVID-19 risks during H1, with a major chunk being spent at Lihir operations towards testing, screening, transport, and others. The significant rise in COVID-19-related costs reflects impacts of government restrictions on absenteeism, travel and isolation requirements.

Furthermore, the miner expects that the total cost of managing COVID-19 for the FY2022 financial year will range from AU$50 million to AU$60 million.

Dividends

NCM targets a total annual dividend payout of 30-60% of free cash flow generated for the financial year, with annual total dividends of at least US$0.15 per share.

Also Read: Why are Newcrest Mining (ASX:NCM) shares trading 5% down today?

FY22 Guidance

Despite a significant fall in its half-year profits, the miner didn't lower its full-year guidance. NCM states that it is on track to deliver its full-year Group production guidance. The miner says that Lihir’s performance is expected to further improve in the remaining months of the ongoing financial year.

Bottom Line

NCM has recorded a significant drop in its profits during the first half of FY22 due to lower production, scheduled maintenance activities and COVID-19 restrictions. However, the miner is well guided to achieve its FY22 guidance.