Silver Wheaton Corp., which pays mining companies upfront for future production, expects cash flow and dividends will increase in the last three months of 2012 as sales of the metal catch up with production.
Silver Wheaton reported third-quarter earnings today that missed analysts’ estimates after the number of ounces sold lagged output because of the timing of shipments. The Vancouver-based company also said its cash flow-linked dividend declined.
“We’ve already seen a bunch of shipments from these mines where inventory did build up,” Chief Executive Officer Randy Smallwood said today in a phone interview. The fourth quarter is “always a good one in terms of inventory” as mining companies push sales to improve year-end earnings, he said.
Third-quarter net income fell 11 percent to $119.7 million, or 34 cents a share, from $135 million, or 38 cents, a year earlier, Silver Wheaton said in a statement today. The average of 13 analysts’ estimates was for 40 cents. Sales fell 13 percent to $161.3 million.
Production rose to the equivalent of 7.69 million ounces of silver from the third quarter of 2011, the company said, while metal sales gained less than 1 percent to 5.14 million ounces.
Silver Wheaton declared a quarterly dividend of 7 cents a share, 30 percent less than in the previous quarter. The company isn’t planning to change its policy of paying out 20 percent of cash generated by operating activities in the previous quarter, Smallwood said.
“The reason it’s down is the same reason it was up in the last quarter,” he said. “We’re pretty confident that dividend will be very, very nice at the end of the fourth quarter.”
The dividend decline is “expected to be temporary”, Dan Rollins, a Toronto-based analyst at RBC Capital Markets, said in a note today. Silver Wheaton may declare a dividend of 12 cents a share in the first quarter and may close the year on a “strong note,” he wrote.
Silver Wheaton fell 1.4 percent to C$38.88 at the close in Toronto. The shares have risen 32 percent this year, compared with an 11 percent increase in silver futures on the Comex in New York.