Petra Diamonds boosts cash flow despite revenue slump

By Tawanda Karombo

PETRA Diamonds has reported a rise in cash flow from operations for the interim period to December, despite a significant 30% dip in revenues in a challenging operating environment.

The company mines diamonds from the Finsch and Cullinan mines in South Africa while it is disposing of its interests in the Williamson mine in Tanzania to Pink Diamonds Investments. It has run into problems with labour unions resisting its plan to retrench employees from some of its South African operations.

However, Petra Diamonds on Monday reported that a cost reduction exercise last year had translated to improved cash flow from operations. The company also cut capital expenditures.

“As a result of cost reductions, (half-yearly) cash preservation measures, and working capital optimisation, cash flow from operations increased to $55 million (approximately R1 billion) from $34 million (a year earlier),” said Vivek Gadodia, joint interim CEO of Petra Diamonds.

The company lowered mining and processing costs from continuing operations by 19% and cut capex by 32% during the period under review.

Nonetheless, interim revenues slithered 30% to $49m compared to the same period a year earlier. Petra Diamond attributed this to some $50m worth of additional revenue from some tenders being carried over in the previous corresponding period.

With adjusted earnings before interest, tax, depreciation and amortisation of $15m lower than the $38m for the corresponding period, Petra tipped into a basic loss per share from continuing operations 30 US cents 13 US cents after accounting for non-controlling interests.

As at the end of the period under review, consolidated net debt in Petra rose to $215m from $193m “due to diamond market weakness and the timing” of the company’s tender sales. This was, however, partially offset by cost control and capital spend efficiencies.

An amount of $50m remained available for drawdown from the company’s revolving credit facility, with drawdowns of $56m and repayments of $36m made during the period under review related to working capital needs and the repurchase and cancellation of $24m of the company’s 2L Notes.

Petra has had to suspend ts 2L Notes Open Market Repurchase programme as it is now focused on engaging its lenders regarding the refinancing of its debt.

“Lower EBITDA over CY 2024 caused Petra not to meet the required leverage and interest cover covenant ratios in its Revolving Credit Facility (RCF) measured at 31 December 2024. However, Petra has obtained a waiver from our lender, Absa Bank, in relation to these covenant breaches,” said Gadodia.

During the period under review, Petra Diamonds completed the disposal of its interest in Koffiefontein, avoiding closure-related costs of $23m, while in January it entered into an agreement in to sell its interest in Williamson mine for a headline consideration of up to $16m.

“These steps, together with the Restructuring Plan of the business that is underway, are intended to ensure that Petra is a focused, resilient company able to withstand pricing weakness, while positioning for upside in stronger markets,” explained Gadodia.

– BUSINESS REPORT