FTSE falters as Antofagasta leads mining shares lower
Leading shares have slipped back as mining companies fell on Chinese growth worries and the Bank of Japan made gloomy noises about the economic outlook.
Antofagasta is leading the fallers, down 50.7p at 486.8p as the copper specialist cancelled its final dividend,saying its interim payment met its target of paying 35% of earnings. Its full year profits fell by 82.9% to $259.4m, and the company said it did not expect a sustained recovery in copper prices until late 2017.
Shore Capital analyst Yuen Low called the results “ugly as expected”, adding:
Antofagasta’s 2015 financials were very poor in comparison with 2014, and revenue, EBITDA and total dividend per share were also behind consensus…
In an effort to rein in capital expenditure and preserve cash in 2016, the Encuentro Oxides project and the new molybdenum plant at Centinela will have their development slowed so that they will only be completed in the second half of 2017, rather than end 2016 and early 2017, respectively. According to Antofagasta, stopping these projects would have been “disproportionately expensive”, whereas the slow-down as “no impact” on their net present value (we wonder how this is possible, unless net present value is zero or worse). Further commitments to other projects “will only be considered when the market outlook improves”.
Canaccord Genuity also called the results “poor” and correctly predicted:
Given that these results were at the bottom end of the consensus range, and the shares have rallied over 50% since mid-January, we would expect Antofagasta shares to react negatively today, all else being equal.
Other mining shares were hit by renewed concerns about the Chinese economy after the weekend’s poor retail sales and industrial production data. The Bank of Japan kept its interest rates unchanged but expressed concern about the current state of the economy, which has not helped sentiment.
Anglo American is down 40.8p at 505.7p while BHP Billiton has lost 50.1p to 766.1p.
Elsewhere Legal & General is down 12p at 231.6p on worries about possible changes affecting the insurance sector in Wednesday’s UK budget. L&G’s profits were up 14% but its capital position was below some expectations.
Royal Bank of Scotland has risen 3.3p to 234.5p as Goldman Sachs added the bank to its conviction buy list.
Sainsbury’s is up 1.6p at 282.2p after it reported its first quarterly sales growth in two years, while Ocado was also lifted by its results, adding 15.6p to 277.2p.
Overall the FTSE 100 has fallen 36.55 points to 6138.02, ahead of the US Federal Reserve and Bank of England’s meetings this week, not to mention the budget.