Today I am looking at three of the movers and shakers in Thursday business.
KAZ Minerals
Copper miner KAZ Minerals (LSE: KAZ) has electrified the market in Thursday’s session, and the business was recently leading the FTSE pack with an 18.6% charge higher. This comes despite the digger announcing a 20% decline in revenues during January-June, to $341m, thanks to a diving red metal price. This drove EBITDA 55% lower to $88m.
Still, shares in KAZ Minerals have taken off after the Kazakh tenge collapsed by almost a quarter, prompted by the government’s decision to introduce a free-floating exchange rate for the currency. The move was made to improve competiveness with key partners China and Russia, and is great news for KAZ Minerals as it significantly brings down much of its operating cost base.
But I still believe the copper miner remains a high-risk selection as the metal’s price just keeps on tumbling — the commodity sunk back below $5,000 per tonne for the first time since the 2008/2009 financial crisis this week. With LME inventories continuing to bulge and insipid demand — particularly from China — failing to pick up the slack, I believe KAZ Minerals could continue to see the top line slide.
Premier Oil
Like KAZ Minerals, fossil fuel giant Premier Oil (LSE: PMO) also received a kick higher despite releasing poor numbers and was last 3.5% higher from Wednesday’s close. The company advised that it had swung to a pre-tax loss of $214.7m during the first half from a profit of $50.7m in the same 2015 period.
The business was whacked by a combination of lower production — total output rang in at 60,400 barrels per day versus 64,900 barrels a year earlier — and collapsing crude prices, naturally, problems which drove revenues 32% lower to $605.6m. More promisingly, however, Premier Oil has renegotiated debt covenants until the middle of 2017 to give it more breathing space against a backcloth of subdued oil prices.
But uncertainty over the future of the oil price still makes the driller a high-risk selection, in my opinion, meaning that these latest debt deals could prove nothing more than a sticking plaster. Crude has tumbled back to fresh six-year lows around $46.50 per barrel today thanks to fears of intensifying economic cooling in China and plentiful oil supplies. Given this picture, I believe City expectations of a return to earnings growth next year for Premier Oil is fanciful at best.
WH Smith
Retailer WH Smith (LSE: SMWH) failed to mirror the share price success of its FTSE peers in Thursday trade and was last 1.8% lower on the day. This comes despite the newsagent advising that its Travel division “continued to deliver a strong performance with good sales across all of our core channels” during March-August, while revenues across its Retail arm edged ahead of forecasts.
Consequently, WH Smith said it expects results for the full-year to August “to be slightly ahead of the consensus of analysts’ expectations,” news which comes as little surprise to me. The company has invested massively in its store expansion programme in both the UK and abroad, while surging passenger numbers have also helped the top line move steadily higher.
With cost-cutting across the firm also clicking through the gears, the City currently expects WH Smith to enjoy a 9% bump in both fiscal 2015 and 2016, driving a P/E ratio of 18.1 times for the outgoing year to just 16.7 times for the following period. And I fully expect the retailer’s restructuring efforts to boost gains from improving UK retail conditions in the longer term.
