SMT:CC - Sierra Metals (SMTS)(SMT:CA) - Strong Finish to a Challenging Year

Full year financial results. Sierra Metals reported 2021 adjusted net income attributable to shareholders of $21.6 million, or $0.13 per share, compared with $30.8 million, or $0.19 per share, in 2020. Adjusted EBITDA increased 1.8% to $104.7 million compared to $102.8 million in the prior year. Our EPS and EBITDA estimates were $0.06 and $89.7 million. Variances to our estimates include higher revenue, differences between actual and modeled net income to non-controlling interests, and various add backs that closed the delta between a GAAP loss of $(0.17) per share and adjusted EPS, including a $35 million asset impairment. In light of 2021 operational challenges, financial and operating results exceeded our expectations.2022 Guidance. Management forecasts 2022 EBITDA in the range of $90.0 to $105.0 million based on copper equivalent production in the range of 79.5 million to 89.7 million pounds. Completion of mine development at Bolivar should drive stronger financial results in the second half of the year. We think the company's growth outlook is supported by expansions at existing operations, the addition of an iron ore processing plant at Bolivar, and potential acquisitions to enlarge its portfolio of copper and base metals producing properties.Updating estimates. We are lowering our 2022 EPS and EBITDA estimates to $0.21 and $100.9 million from $0.22 and $121.8 million. Given that we have re-apportioned the allocation of net income between shareholders and non-controlling interests, the magnitude of decline is greater for EBITDA. As part of its strategic shift away from primarily precious metals producing assets, Sierra is in the process of conducting a process to divest the Cusi mine which could have implications for 2022 guidance and our estimates.Rating remains Outperform. In our opinion, Sierra Metals offers an attractive valuation and is well-positioned to benefit from growing demand for its metals driven by economic growth, infrastructure spending, and for use in clean energy and renewable power technologies. Read More >>