Will The Appointment Of The New CEO Bring Petra Diamonds Performance On The Track?

  • Feb 21, 2019 GMT
  • Team Kalkine
Will The Appointment Of The New CEO Bring Petra Diamonds Performance On The Track?

Petra Diamonds Ltd (Ticker Symbol: PDL) recently announced that it had appointed former gold miner Richard Duffy as the Chief Executive Officer, with effect from 1st April 2019. He will replace Johan Dippennar, who has led the company for the last 14 years and had announced his decision to step down in September last year. The company also reported that net loss in the first half of the financial year 2019 had decreased to $57.9 million from $117.7 million in the corresponding period last year. Both positive news resulted in 8 per cent surge in the share price.

Petra Diamonds Ltd is a leading diamond mining group, headquartered in Jersey, the United Kingdom. The groups consistently supply rough diamonds to the international markets. The company’s business operations spread across Africa, Tanzania, South Africa and Botswana, with significant segments include Mining and Exploration. The group’s assets across Africa are four underground kimberlite mines with three underground mines in South Africa; an open cast kimberlite mine in Tanzania; and tailings retreatment programs. An exploration programme is also maintained by the company in Botswana and South Africa.

Mr Duffy is currently serving as a director of an Africa-based renewable energy firm, which he co-founded in 2015. Before that, he was the Chief Financial Officer and head of African operations at AngloGold Ashanti, having worked there for 16 years. Petra’s chairman, Adonis Pouroulis, said Mr Duffy is going to be very important to see through Petra’s focus shift away from intensive capital expenditure and expansion towards a steady, cash-generating business. He brings in rich financial experience as the company looks to decrease its debt burden on its balance sheet amid low diamond prices. Net debt as at 31st December 2018 was $559.3 million, increasing from $520.7 million six months earlier. Reducing debt remains a priority for the company and seeks to lower the net debt to EBITDA ratio to 2 by the middle of 2020 from 3.3.

The company’s stock had fallen by 30 per cent this year as the company seeks to cut debt, while diamond prices have dropped below historical annual averages. In the first half of the financial year 2019, the adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) decreased to $75.6 million, a fall of 6.4 per cent, while pretax loss narrowed to USD20.7 million from USD40.4 million the year before. Revenue increased by 8 per cent to $207.1 million from $191.8 million last year, reflecting a rise in the number of carats sold which grew by 15 per cent to 1.74 million. Low diamond prices hit the company's financials, in addition to that, Cullinan, the flagship mine, also produced lower-value diamonds than in the past. Total production in the second half of 2018 increased by 10% to 2.0 million carats, with the company sticking to its production forecast of 3.8 million to 4.0 million carats for the financial year 2019.

One Year Share Price Performance

(Source: London Stock Exchange)

Share Price Commentary

  • On 20th February 2019, PDL share closed at £27, up by 4.49 per cent against its previous day closing price.
  • Stock's 52 weeks High and Low is £73.45/£25.60. At the closing price, the stock was trading 63.24 per cent lower than its 52w High and 5.47 per cent higher than its 52w low.
  • In the last year, the share fell by 54.23 per cent.

Conclusion

According to analysts, the continuing rise in net debt despite decreased capital expenditure is still a matter of concern. However, they feel the appointment of the new CEO as positive news, given his impressive experience in mining, Africa and finance.

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