Centamin profits fall more than expected, but dividend impresses

LONDON (ShareCast) - Profits at gold miner Centamin (Toronto: CEE.TO - news) more than halved in 2014 as higher production was offset by increased output costs and lower commodity prices. However, shares in the Arabian-Nubian Sheild-focused producer surged on Monday after the company declared its maiden full-year dividend, with the payout ratio at the top of guidance.

Full-year production rose 6% to 377,261 ounces (oz) in 2014, with output in the fourth quarter of 128,115oz up 37% on the preceding three months.

However, the average cash cost of production was $729/oz last year, up 10% on 2013, while the average realised gold price fell 9% to $1,257/oz As a result, pre-tax profit totalled just $81.56m in 2014, down 56% from $183.97m the year before. Earnings per share dropped 57% to 7.21 cents, well below the consensus forecast of 11.2 cents.

Despite the weaker results, the cash balance rose to $125.7m by the end of the year, up from $106m in 2013.

After a maiden dividend of 0.87 cents per share was paid at the half-year stage, Centamin has proposed a final payment of 1.99 cents, taking the full-year total to 2.86 cents.

As such the dividend represented a payout ratio of around 30% of free cash flow (FCF), towards the top-end of its 15-30% targeted dividend policy. Looking forward, the group said it wanted to continue generating substantial FCF even under challenging gold-price assumptions.

"We intend to return 15-30% of this cash flow to our shareholders, in line with our dividend policy, and to allocate the remainder towards our medium and long-term objective of organic growth aimed at realising incremental shareholder value and returns," it said.

Analysts at Shore Capital said they liked the full-year dividend, which equalled a dividend yield of 3.57% which is an "attractive yield in our opinion".

The stock was up 6.8% at 57.42p in early deals.