SHERRITT INTERNATIONAL $0.79 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 293.9 million; Market cap: $226.3 million; No dividends paid) is now focused on nickel production, with operations in Cuba and Canada.
As well, it has a 40% interest in the Ambatovy nickel mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan and manages 506 megawatts of power generation capacity in Cuba.
In the three months ended September 30, 2015, the company’s revenue fell 25.3%, to $76.9 million from $102.9 million a year earlier, mostly due to lower oil and gas prices. Cash flow per share fell sharply, to $0.05 from $0.16.
Sherritt paid off $425 million of debt in October 2014 after selling its coal interests for $793 million in cash in April 2014. Even so, it ended the latest quarter with long-term debt of $2.1 billion, or a high 9.7 times its currently depressed $217.5-million market cap. The company holds cash of $265.8 million.
To conserve cash, Sherritt has cut 10% of its salaried workforce. It also stopped paying its dividend, which should save it $12 million a year. The company has also said it will reduce its 2016 capital spending by as much as 25% to 35%. Earlier this year, it lowered its planned 2015 capital spending to $195 million from $210 million.
Most of the company’s revenue and earnings come from Cuba, which adds risk. However, it’s diversifying away from that country by investing in other nations, such as Madagascar. Sherritt needs an improving global economy to fuel commodity demand, but it’s well positioned to profit when markets rebound.
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