Newcrest (ASX:NCM) share price lifts despite 46% profit drop

What did Newcrest Mining report in its results today? Let's take a closer look.

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Key points

  • The Newcrest Mining share price is edging higher today
  • The company reported a 10% increase in gold ore reserves to 54 million ounces
  • Newcrest declared a dividend of 7.5 US cents (10.4 AU cents)

The Newcrest Mining Ltd (ASX: NCM) share price is holding up despite the company reporting a fall in revenue, profit, and production.

Newcrest shares are currently swapping hands for $23.80 apiece, a 1.26% gain. In comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.66%.

Let's take a look at what the gold miner reported today.

Newcrest share price gains on financial results

Highlights of the company's half-year (H1 FY22) results include:

  • Statutory profit of US$298 million (A$414 million), down 46% on previous corresponding period (PCP) of H1 FY21
  • Revenue of US$1,715 million, a 21% fall on PCP
  • Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $740 million, a 35% drop on PCP
  • Gold production down 20% on PCP
  • Copper production down 27% on PCP
  • All-in sustaining cost of US$1,194 per ounce, up 23%
  • All-in sustaining cost margin of US$502 per ounce, down 40%

What else happened in the half?

Newcrest declared a fully franked interim dividend of 7.5 US cents (10.4 AU cents), to be paid on Thursday, 31 March 2022.

The company reported major growth in its mineral resources and ore reserves, including a 10% rise in gold ore reserves to 54 million ounces.

The underlying profit was lower due to a planned upgrade of the Cadia SAG mill motor, which was completed in November. Production was also lower at the Lihir gold mine due to an expected fall in the grade of the ore.

The results reflected falling gold and copper sales due to less production at the mine, the company said. This wasn't helped by a lower realised gold price, higher freight costs, and a strengthening Australian dollar against the US dollar impacting operating costs. Supply issues and rising demand also put pressure on the operating costs.

On a positive note, a higher realised copper price and less income tax expense partially offset these concerns. Overall, operating costs were lower due to lower sale volumes, a decreasing gold price, and other volume-linked costs.

Additionally, the company highlighted it is creating a brighter future via its safe and responsible mining. There has not been a fatality at the mine for six years.

Management commentary

Investors are pushing the Newcrest share price higher on the back of the results. This positive sentiment was echoed by CEO Sandeep Biswas, who said:

We have taken a big step forward in our profitable growth agenda during the first half of FY22. The depth and quality of our global organic growth portfolio was demonstrated through the announcement of the findings of the Cadia PC1-2, Red Chris Block Cave, Havieron Stage 1, and Lihir Phase 14A Pre-Feasibility Studies.

The outlook for the commodities that we mine is strong, and we have additional opportunities to further enhance our gold and copper production profile. Our team continues to pursue the potential for further open pit and underground opportunities to extend the life of Telfer, the development of Wafi-Golpu and potentially Namosi, all of which represent upside opportunity to our current base case projections.

What's next for Newcrest?

Newcrest is on track to deliver its FY22 production guidance on the back of it completing major maintenance in September and the Cadia SAG mill motor upgrade.

The miner expects performance at the Lihir mine will improve in the second half of the financial year due to higher-grade ore.

Its all-in sustaining cost guidance also remains unchanged. However, the costs of managing COVID-19 are expected to be around $50-$60 million, up from the $35-$45 million estimated at the start of the financial year. This is due to government restrictions on travel, staff absences, logistic challenges, and isolation.

Newcrest believes the outlook for the commodities it mines is strong. The company will continue to improve its gold and copper production profile.

Commenting on the future outlook, Biswas added:

Following a solid start to the financial year, Newcrest is well placed to deliver a strong second half, to continue to pursue profitable growth, and to progress our Forging an Even Stronger Newcrest plan.

Newcrest share price summary

The Newcrest share price has fallen 3% in the past year, while it is up 3% in the past week.

For perspective, the benchmark ASX 200 has returned around 6.5% over the past year.

Newcrest has a market capitalisation of roughly $19.2 billion based on today's share price.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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