Nexa Resources S.A. (NEXA) Q4 2025 Earnings Call Transcript
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Overview
The earnings call reveals stable operational performance and positive cash flow expectations, but the lack of specific guidance on key projects and unresolved environmental issues temper optimism. The Q&A session highlights management's confidence in cash flow and debt reduction, yet uncertainties in project timelines and political stability in Peru persist. The company's market cap suggests moderate sensitivity to these factors, leading to a neutral stock price reaction prediction.
Key Financial Performance
Zinc Production (Q4 2025) 91,000 tonnes, a 9% increase from the third quarter and a year-over-year increase. The improvement was driven by enhanced operational performance at Vazante, Aripuana, Cerro Lindo, and Atacocha.
Zinc Sales (Q4 2025) 142,000 tonnes. Sequential volume was constrained by lower production at Brazilian smelters and softer demand for zinc oxide.
Net Revenues (Q4 2025) $903 million, an 18% sequential increase and a 22% year-over-year increase. Growth was fueled by higher average metal prices, stronger contribution from byproducts, and improved mining performance.
Adjusted EBITDA (Q4 2025) $300 million, a significant improvement quarter-over-quarter and year-over-year, translating to a 33% EBITDA margin. This reflects stronger price realization and improved operating leverage from increased volumes.
Net Income (Q4 2025) $81 million or $0.38 per share. This was supported by operational performance and higher realized prices for zinc and byproducts.
Free Cash Flow (Q4 2025) $51 million. This reflects operational performance and disciplined cost management.
Net Leverage (Q4 2025) 1.7x, improved from 2.2x in the previous quarter, supported by higher last 12-month EBITDA and a reduction in net debt.
Zinc Production (Full Year 2025) 316,000 tonnes, meeting guidance. Volumes were impacted in the first half due to temporary operational constraints and lower grades.
Net Revenues (Full Year 2025) $3 billion, a 9% increase compared to 2024. This was driven by solid operational execution and a favorable pricing environment for zinc and byproducts.
Adjusted EBITDA (Full Year 2025) $772 million, up 8% versus 2024, with a margin of 26%. This reflects disciplined execution, pricing support, and effective cost management.
Net Income (Full Year 2025) $223 million or $1 per share. This was supported by operational performance and a favorable pricing environment.
Free Cash Flow (Full Year 2025) Negative $105 million, which included debt reductions and dividends.
Mining Segment Net Revenues (Q4 2025) $532 million, driven by higher metal prices and improved operational execution.
Mining Segment Adjusted EBITDA (Q4 2025) $266 million, translating to a 50% EBITDA margin. This was fueled by higher metal prices and improved operational execution.
Mining Segment Net Revenues (Full Year 2025) Approximately $1.6 billion, reflecting strong operational performance.
Mining Segment Adjusted EBITDA (Full Year 2025) $658 million, a 42% margin, demonstrating earnings resilience.
Smelting Segment Net Revenues (Q4 2025) $573 million, reflecting the challenging market environment and operational constraints.
Smelting Segment Adjusted EBITDA (Q4 2025) $34 million, reflecting the challenging market environment and operational constraints.
Smelting Segment Net Revenues (Full Year 2025) Approximately $2 billion, reflecting operational performance.
Smelting Segment Adjusted EBITDA (Full Year 2025) $113 million, corresponding to an EBITDA margin of 6%.
CapEx (Full Year 2025) $352 million, slightly above the $347 million guidance due to the appreciation of the Brazilian real against the U.S. dollar.
Exploration and Project Evaluation Investments (Full Year 2025) $78 million, below the initial plan of $88 million, consistent with the capital allocation framework.
Liquidity Position (Q4 2025) $842 million, including an undrawn $320 million sustainability-linked revolving credit facility.
Average Debt Maturity (Q4 2025) 7.6 years, improved from 5.6 years at the end of 2024, with an average cost of debt of 6.49%.
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Operating Highlights
Zinc production: Achieved 91,000 tonnes in Q4, a 9% increase from Q3, and 316,000 tonnes for the full year, meeting guidance.
Aripuana operations: Achieved highest quarterly production to date, with operational stability and reduced downtime. Fourth tailings filter installation on track for 2026.
Exploration: Confirmed new mineralized extensions at Aripuana and Cerro Lindo, supporting life of mine extensions.
Zinc market: Prices supported by tight concentrate supply and low inventories. Expected gradual improvement in mining supply in 2026.
Copper market: Prices increased due to electrification demand and supply discipline, with medium-term supply constraints expected.
Silver market: Strong Q4 performance driven by investment flows and industrial demand. Nexa's silver streaming agreement to step down in 2026, increasing exposure to silver prices.
Financial performance: Q4 net revenues of $903M and adjusted EBITDA of $300M. Full year net revenues of $3B and adjusted EBITDA of $772M.
Cost management: Mining cash costs improved to negative $0.58 per pound in Q4, with full year costs below guidance at negative $0.30 per pound.
CapEx: Total CapEx of $352M in 2025, slightly above guidance due to currency impacts. Investments focused on sustaining activities and Cerro Pasco Integration Project.
Cerro Pasco Integration Project: Phase 1 construction and commissioning activities to intensify in 2026, targeting a life of mine extension of over 15 years.
ESG initiatives: Advanced renewable energy supply, waste reduction, and community engagement. Recalibrated ESG targets for improved transparency and alignment with operational realities.
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Risk or Challenges
Smelting Division Constraints: Lower production at Brazilian smelters and softer demand for zinc oxide constrained sequential volume, impacting operational performance.
Operational Costs at Aripuana: Higher operational costs at Aripuana due to ramp-up and stabilization efforts increased the cost per tonne of run of mine.
Cash Flow Challenges: Free cash flow for the full year was negative $105 million, reflecting deliberate capital allocation decisions, including debt reduction and shareholder distributions.
Supply Chain Tightness: Tight concentrate supply in the zinc market led to higher costs and constrained margins, particularly in the smelting segment.
Foreign Exchange Impact: Unfavorable foreign exchange valuations at Brazilian units increased operational costs, affecting conversion costs.
Cerro Pasco Integration Project Risks: Phase 1 investments were slightly below plan, and the project requires disciplined execution to achieve long-term value and life of mine extension.
Market Volatility: Trade policy volatility and macroeconomic uncertainties could impact zinc and copper prices, affecting revenue stability.
Energy Costs: High energy costs outside China may constrain margin expansion in the smelting segment.
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Guidance & Outlook
Aripuana Production Capacity: The fourth tailings filter installation is progressing as planned, with commissioning on track for the first half of 2026. Full operational capacity is expected in the second half of 2026, enhancing long-term cash flow generation.
Cerro Pasco Integration Project: Phase 1 construction and commissioning activities will intensify in 2026, targeting a life of mine extension of over 15 years. Preparatory studies for Phase 2 are ongoing to define the most efficient long-term configuration.
Exploration Program: Exploration efforts in 2025 confirmed new mineralized extensions across key assets, supporting further life of mine extensions and reinforcing geological potential.
Smelting Segment Margins: Increasing global mine supply is expected to lift treatment charges in 2026, supporting a gradual rebound in smelting margins.
Silver Streaming Agreement: Starting in Q2 2026, the silver streaming agreement will step down from 65% to 25%, materially increasing realized exposure to silver prices and enhancing EBITDA leverage.
Zinc Market Outlook: Zinc prices are expected to remain supportive in the first half of 2026 due to tight inventories, resilient demand, and a softer U.S. dollar environment. A gradual improvement in mining supply is anticipated to support a modest recovery in treatment charges.
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Shareholder Return Plan
Dividends: During the year, Nexa distributed $48 million in dividends, including share premium reimbursement and payments to noncontrolling interests.
Shareholder Returns: Nexa emphasized a balanced capital allocation approach that includes deleveraging and shareholders' return. This includes the distribution of dividends and maintaining a focus on generating sustainable cash flow to support shareholder returns.
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Key Q&A
Q:Could you provide some color on the evolution of the asset production throughout this year given the seasonal context of the first quarter and the inauguration of the fourth filter affecting the second half of the year?
A:The bottleneck with the three tailings filters limits the plant to 140,000-145,000 tonnes per month. Despite the rainy season, production has stabilized at this rate. High-grade zones have allowed for increased silver equivalent production. The fourth filter will be implemented in April and ramped up by June, enabling full capacity in the second half of the year.
Q:Are you contemplating doing additional silver streaming to bring significant cash to deleverage the balance sheet quickly?
A:No, additional silver streaming is not a priority. The company is confident in its current structure and expects strong cash flow from rising silver prices to reduce debt over the coming years.
Q:How should we think about the cash flow impact of the Cerro Lindo silver stream in 2026 and 2027, considering that deliveries are priced at a fixed percentage of spot?
A:The silver streaming agreement will step down from 65% to 25% of Cerro Lindo's silver production after delivering 19 million ounces. This will result in 40% of production staying within Nexa, positively impacting cash flow.
Q:Has there been any incident in your operations or logistics due to strong rains in Peru?
A:No incidents have occurred. The company has prepared for such events, and production and logistics remain unaffected.
Q:Can you provide color on Phase 2 of the Cerro de Pasco integration project, especially regarding the start-up date and access to high-grade reserves at Atacocha?
A:There is no specific start-up date for Phase 2. Drilling in the intersection of the two mines has revealed high-grade resources, and a mine plan will be developed in 1-2 years.
Q:Is management considering using instruments to lock in the benefits of currently high silver prices?
A:No, silver streaming is not a priority. Management is open to proposals but is not actively pursuing this option.
Q:Can you provide an update on the Magistral project and Tinka Resources investment?
A:The environmental impact study for Magistral was disapproved, and discussions with the government are ongoing. Nexa decided not to follow up on equity in Tinka Resources, prioritizing other investments.
Q:Can you comment on the current electoral environment in Peru and its impact on the company?
A:The political environment in Peru is unstable, but it does not significantly impact the economic context or the company's operations. Relationships with communities remain strong and unaffected by political changes.
Q:How much debt are you planning to pay down in 2026 and 2027?
A:Debt repayment is a priority. Excess cash will be used to pay dividends and reduce debt, following the company's dividend policy.
Q:Could you provide details on the floor and upper limit of the hedging program for silver and gold?
A:A small portion of silver production is hedged, with a floor of $52 and a cap of $84.
Q:What is the medium-term strategy for the company after implementing the fourth filter for Aripuana and reducing leverage?
A:The company aims to stabilize operations, reduce debt, and actively seek opportunities in the copper market. A more flexible balance sheet will enable these investments.
Q:Could you give additional details on your CapEx disbursement for the Cerro Pasco project this year and next?
A:CapEx for Phase 1 of the Cerro Pasco project was $42 million last year and is expected to be the same this year to complete Phase 1. Execution is on track and within budget.
Q:Review of Unclear Management Responses
A:Management avoided providing specific dates for accessing high-grade reserves at Atacocha, stating that a mine plan would be developed in 1-2 years. Additionally, no concrete actions were outlined for the Magistral project, as discussions with the government are still ongoing.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Aripuana production
China
Full Conference
Integration Project
Nexa
Pasco Integration
Prices
Resources Full
Vazante
action
baseline
byproduct mining
climate
concentrate
constraint
debt reduction
diversification
dollar environment
efficiency
governance
intersection
investment plan
life extension
margin resilience
mining supply
movement cash
policy
portfolio
pricing environment
production smelter
production tonne
reduction dividend
reflection
resilience mining
revenue margin
segment revenue
share
smelting
standpoint
target
tonne line
transparency
zinc byproduct
NEXA Transcript
Nexa Resources S.A. (NEXA) Q4 2025 Earnings Call Transcript
Unknown2-27
The earnings call reveals stable operational performance and positive cash flow expectations, but the lack of specific guidance on key projects and unresolved environmental issues temper optimism. The Q&A session highlights management's confidence in cash flow and debt reduction, yet uncertainties in project timelines and political stability in Peru persist. The company's market cap suggests moderate sensitivity to these factors, leading to a neutral stock price reaction prediction.
Nexa Resources S.A. (NEXA) Q3 2025 Earnings Call Transcript
Unknown10-31
The earnings call presents a mixed outlook. While operational improvements and a positive liquidity position are noted, challenges such as high workforce turnover, unclear guidance on CapEx adjustments, and operational challenges at Aripuana persist. The Q&A reveals some management vagueness, particularly concerning CapEx flexibility and workforce turnover. Despite positive long-term market outlooks and improved leverage, these uncertainties and operational issues balance out the positive elements, leading to a neutral sentiment.
Nexa Resources S.A. (NEXA) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call summary shows mixed results: strong free cash flow and improved cash costs are positive, but increased costs and lower YoY zinc production are concerning. The Q&A reveals uncertainties, particularly around guidance downgrades and management's unclear responses. Despite the company's strategic initiatives and financial discipline, these mixed signals and market cap suggest a neutral stock price movement.
Nexa Resources S.A. (NYSE:NEXA) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call highlights several negative factors: operational challenges due to heavy rainfall, increased net debt-to-EBITDA ratio, and a decline in zinc production. The Q&A session reveals concerns about geotechnical issues and vague responses on TCRCs. Despite positive cash flow and debt management, these issues, combined with unchanged revenue and decreased EBITDA margin, suggest a negative sentiment. Given the company's small market cap, the stock is likely to react negatively, potentially falling between 2% to 8%.
NEXA Report
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