Key Takeaways From Wheaton Precious Metals’ First Quarter Results

by Trefis Team
Wheaton Precious Metals
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Wheaton Precious Metals (NYSE: WPM) released its first-quarter 2018 results on 10th May and conducted a conference call with analysts the following day. The company reported an EPS (Non-GAAP) of $0.16, marginally beating market estimates and reporting a 14% y-o-y growth. However, revenue fell short of expectations at $199.5 million, roughly 1% higher from the same period last year. Higher silver sales volume compensated for lower gold sales volume, whereas higher gold prices helped enhance gross margins and cash flows. Furthermore, the company’s latest update with respect to its ongoing dispute with the Canada Revenue Agency (the “CRA”) boosted investor confidence and supported its share price.

Wheaton reported a 21% increase in its silver sales volume, largely as a result of increased production in the San Dimas mines which were negatively impacted by union strikes in the same period last year. Gold sales volume, on the other hand, declined by 21%, as a result of the decrease in output in Minto and Sudbury mines due to lower grade and lower throughput. Realized gold prices, however, displayed a 10% y-o-y growth, largely benefiting from increased safe haven investment demand due to the prevailing global uncertainties in Q1 with respect to the U.S.- China trade tension and the geopolitical tensions in the Middle East. Higher gold prices also enabled the company to report almost a 5% improvement in its gross margins and roughly 5% improvement in its operating cash flow position.

Further, Wheaton finally provided an update with respect to its ongoing tax dispute with the CRA. The CRA is contesting the tax exempt status of the operations of the company’s international subsidiaries (which are based in tax havens not subject to income tax). While the company management remains confident of the validity of its tax position, the ongoing dispute has been a source of uncertainty hanging over its high margin business model. The company was notified that the tax court of Canada has scheduled the trial to commence in mid-September 2019 for a two-month period and reiterated its stance on resolving the issue at the earliest.

Our key expectations for the company’s 2018 results have been kept unchanged based on the reported Q1 numbers. You can make changes to our assumptions by using our interactive dashboard to arrive at your own fair price estimate for the company.


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