Why the Evolution (ASX:EVN) share price crashed despite record results

The Evolution Mining Ltd (ASX: EVN) share price is among the worst performing stocks today even as it unveiled its best interim net profit in its history.

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Two men react in shock at Evolution share price drop record profit

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The Evolution Mining Ltd (ASX: EVN) share price is among the worst performing stocks today even as it unveiled its best interim net profit in its history.

The Evolution share price crashed 7.9% to a 10-month low of $4.31 this morning. This makes the gold miner the third worst performer on the S&P/ASX 200 Index (Index:^AXJO).

The only ASX shares that are in a deeper hole are the Zip Co Ltd (ASX: Z1P) share price with its 11.9% tumble and the Pro Medicus Limited (ASX: PME) share price with its 8.4% dive.

Record profits sink Evolution share price

But it seems good isn’t good enough when it comes to Evolution. The miner posted a 57% uplift in underlying net profit to $234 million for the six months to end December 2020.

The strong gold price and bigger margins helped drive the result. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin improved 6% to 52%, which puts it around the top of the sector.

However, revenue only increased by a more modest 9% as the higher gold price was offset by a drop in volume sold.

Not all good news

Also, the increase in EBITDA margin isn’t related to operating costs as that was roughly flat compared to the previous period.

While management was also touting its strong cash generation prowess from favourable tailwinds, group cash flow declined by 10% to $218.1 million.

The record result also wasn’t enough to convince management to boost its interim dividend. That remains flat at 7 cents a share.

Flat dividend as cash drops

To be frank, the dividend decision isn’t a big deal. No one buys an ASX gold miner for income. Even if Evolution did lift its dividend, it would make little difference to total shareholder returns.

Also, given the drop in cashflow, it is probably prudent for management to hold on to the cash.

Having said that, Evolution’s half year results may not be the only factor pressuring the Evolution share price.

Metal fatigue hits ASX gold shares

The spot gold price fell 0.3% to US$1,788 an ounce and some gold traders are predicting more falls for the precious metal.

This is because the yellow metal failed to hold above US$1,800 an ounce and that could invite more selling pressure.

Other ASX gold miners are also on the nose this morning, although not quite to the same extent as Evolution.

The Newcrest Mining Ltd (ASX: NCM) share price shed 2.9% to $24.95 and the Northern Star Resources Ltd (ASX: NST) dropped 6.6% to $10.85 at the time of writing.

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Brendon Lau owns shares of Evolution Mining Limited and Newcrest Mining Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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