Sherritt International Corp T.S

Alternate Symbol(s): SHERF

Metals & Mining Industrial Metals & Minerals

Sherritt International Corporation is a Canada-based company engaged in the mining and refining of nickel and cobalt metals essential for the adoption of electric vehicles. The Company is engaged in the production of high purity nickel and cobalt metals from lateritic ore. Its technologies group creates solutions for oil and mining companies around the world to improve environmental performance. It is also the independent energy producer in Cuba. The Company offers a range of products including Nickel, Cobalt, Fertilizers and Other Products. The Nickel products category includes standard grade, steel grade, and nickel powders. The Cobalt products category includes cobalt briquettes and cobalt powders. The Fertilizers product category includes anhydrous ammonia, granular ammonium sulfate, crystalline ammonium sulfate-super salt, and crystalline ammonium sulfate-standard grade. The Other products category includes sulfuric acid, zinc sulfide, and copper sulfide.

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Sherritt International Corp

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Post by rkhoslaon Aug 03, 2021 10:23am

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Post# 33641958

NB first Look _ July 29

July 29, 2021

Sherritt International Corporation

S (TSX): C$0.53

Stock Rating: Sector Perform

Target: C$0.60

Risk Rating: Speculative

Q2/21 Financials Beat, Balance Sheet Supported

Impact: Neutral

First look at Q2/21 results. Overall, we ascribe a neutral bias on Q2/21 with better-than-expected adjusted EBITDA yet cash balance ~unchanged with elevated distributions (previously telegraphed) offsetting interest payments. S provides a vehicle for focused exposure to Ni and Co pricing, as the balance sheet remains adequate with dated maturities on debt ($358 mln maturing 2026 and $75 mln in 2029).

Adj. EBITDA beats NBF. Adj EBITDA reported as $18 mln (NBF $15 mln) came in better than NBF estimates, supported by a strong production quarter out of Moa and non-op items, with some partial offset from higher NDCC.

Production Modestly Higher, Costs Higher

Production largely in line. Consolidated attrib. Ni production of 9.3 mln lbs (NBF 9.1 mln lbs, Q1/21 was 9.2 mln lbs) was modestly above our estimates and ~flat q/q. NBF view: Ni production well-supported and as previously telegraphed, the Fort Saskatchewan refinery shutdown was rescheduled to August (Q3/21) from June (Q2/21). As a result, we expect lower production next quarter though this is all baked into production guidance of 35.3-37.5 mln lbs which remains unchanged.
NDCC higher q/q. NDCC was US4.58/lb (NBF US$4.00/lb, Q1/21 was US$3.83/lb), up a sizable 20% q/q and 15% above NBF. NBF view: Sherritt's reported costs reflect the impacts of the acid plant shutdown which required purchase of sulphuric acid and inflationary pressures from sulphur, fuel oil and natural gas prices, which more than offset elevated cobalt by-product credits. NDCC guidance remained unchanged at $4.25-4.75/lb.

Balance Sheet Supported

Modest Negative FCF reported. Q2/21 delivered modest FCF of -$1.7 mln (Q1/21 was -$4.1 mln negative FCF). NBF view: Dividend distributions from the Moa JV were US$28 mln in total ($14 mln + $14 mln redirected by JV partner (versus only US$5 mln in Q1/21) and were offset by heavier interest payments in the quarter and the higher costs at Moa. Working capital also logged inflows of $8.0 mln.
Cash modestly lower q/q. Cash & equiv reported as $153.8 mln ($72.3 mln held by Energas in Cuba) vs. Q1/21 at $158.3 mln ($74.4 mln held by Energas), down $4.5 mln q/q. Total liquidity at $215 mln (Q1/21 was $220 mln) and reflects the lower q/q cash balance. Cuban receivables trend higher now US$154.7 mln (Q1/21 was US$154.2 mln), ~flat q/q. NBF view: Cash balance was only modestly lower, in line with modest negative FCF. S's balance sheet remains adequate, in our view, noting ample liquidity and far-out maturities on debt ($358 mln maturing 2026 and $75 mln in 2029).

Maintaining Sector Perform and $0.60 target. A conference call will be held tomorrow, July 30 at 10:00 AM EST (dial-in:1 (888) 500-2295). Our target is based on 0.75x NAVPS. S is trading at a P/NAV of 0.68x.