Nexa Resources S.A.(NEXA) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net revenues for Q1 2025 totaled $627 million, an 8% increase year over year but a 15% decrease compared to Q4 2024, primarily due to lower smelting sales volumes and decreased zinc and lead prices [21][22] - Adjusted EBITDA for Q1 2025 reached $125 million, representing a 3% decrease year over year and a 36% decrease compared to Q4 2024, driven by lower sales volumes and higher costs [22][23] - Adjusted EBITDA margin was 20%, down 2 percentage points from the same period last year [23] Business Line Data and Key Metrics Changes - Zinc production in Q1 2025 was 67,000 tons, down 23% year over year and 8% quarter over quarter, impacted by operational challenges and heavy rainfall [10] - Smelting segment sales reached 130,000 tons, a decrease of 6% year over year and 14% quarter over quarter, primarily due to lower production at certain facilities [11][12] - Cash costs for mining dropped to $0.11 per pound from $0.26 per pound year over year, while smelting cash costs increased to $1.17 per pound from $0.98 per pound in the same period last year [10][12] Market Data and Key Metrics Changes - The average LME zinc price in Q1 2025 was $2,838 per ton, reflecting a 16% increase year over year but a 7% decrease quarter over quarter [30] - The average LME copper price was $9,340 per ton, up 11% year over year and 2% quarter over quarter [32] - The average LME silver price was $32 per ounce, up 37% year over year and 2% quarter over quarter [33] Company Strategy and Development Direction - The company is focused on improving margins through disciplined operational performance and cost control, while navigating a challenging macro environment [7] - The Cerro Del Pasco integration project is progressing well, aimed at extending operational capacity and sustainability [17][18] - The company is committed to enhancing the life of its assets, particularly through exploration and development activities at Aripuana and Cerro Lindo [35][36] Management Comments on Operating Environment and Future Outlook - Management acknowledged the current macro environment's volatility, including concerns over global economic slowdown and supply chain disruptions, but remains optimistic about medium to long-term fundamentals for key metals [6][7] - The company expects to normalize production variations over the coming quarters and is taking measures to recover production levels impacted by heavy rainfall [48] - Management emphasized a disciplined approach to financial and operational strategies, prioritizing cash generation and smart capital allocation [37][38] Other Important Information - The company invested $50 million in CapEx during Q1 2025, primarily for sustaining activities, with a total CapEx guidance for 2025 remaining at $347 million [24] - The liquidity position at the end of Q1 2025 was approximately $721 million, with a net debt to adjusted EBITDA ratio increasing to 2.1 times [27][28] Q&A Session Summary Question: Can you provide more details on geotechnical issues at Vasante and production levels at Cerro Lindo? - Management explained that geotechnical issues at Vasante were due to a collapse in a supporting pillar, affecting high-grade mineral extraction, but they expect to recover production throughout the year [44][45] - Heavy rainfall impacted production at Cerro Lindo, but management projected recovery in production levels as weather conditions improve [46] Question: What are your views on the impact of recent trends on TCRCs? - Management noted that while they have fixed contracts for the year, the recent TCRCs at $80 could impact smelter profitability, but they expect zinc prices to rise in response to market conditions [50][55] Question: How do you see leverage evolving in the next quarters? - Management indicated that they expect leverage to decrease throughout the year, aiming to return to levels similar to the end of 2024 [59] Question: Will you fully reverse the negative working capital by the end of the year? - Management stated that they typically expect working capital to be flat annually and highlighted a one-off tax payment that impacted Q1 working capital [64][66] Question: How is the company managing tariff risks? - Management confirmed that they are not currently exposed to tariffs on zinc and are monitoring the situation closely, emphasizing that demand for zinc in the U.S. remains stable [76][78]