Petra Diamonds has been aware of the political risk of doing business in Tanzania for some time. But have its shareholders? Fellow miner Acacia had been locked in dispute with President John Magufuli’s government for more than six months before Petra has one of its diamond exports blocked last week, and is personnel questioned. This evidently came as a shock to some, though: Petra’s shares fell 24 per cent on the news, taking their 2017 decline to nearly 50 per cent.

Shareholders will therefore have been hoping for some reassurance in this morning’s full-year results – especially given Petra’s debt levels. And the company has tried to provide it. It said that operations at its Williamson mine in Tanzania have now resumed after a four day stoppage, although the company’s parcel of diamonds – 71,654 carats worth – has still not been released for export; and discussions with the Government are ongoing. It is looking on the bright side – or trying to make its shareholders do so: its forecasts and expectations all assume Williamson in normal operation.

Last week, the Tanzanian government claimed that Petra’s latest parcel of diamonds had been undervalued.- even though valuation of the diamonds for royalties purposes is supposedly done by by the government’s own Diamonds and Gemstones valuation agency. Expect those discussions to be difficult.

Still, Williamson contributes just 6 per cent of revenues, and production elsewhere was better: total production was up 8 per cent, to a record 4.0 Mcts, lifting revenues 11 per cent to $477m. But pre-tax profit fell 39 per cent to £46m, due to the delayed ramp-up of Petra’s expansion programmes, rising on-mine cash costs, and the strength of the rand versus the dollar for much of the year.

As a result, cash generated from operations was down 10 per cent to $160m , and net debt leapt 70 per cent to $555m. Two weeks ago, Petra’s banks agreed to relax terms – waiving the two earnings-based covenant tests related to its senior debt facilities for a year.

Today, Petra said it expected net debt levels to start falling from the second half of financial year 2018 as capital expenditure reduces, with free cashflow to be generated from that point onwards.

Chief executive Johan Dippenaar said:

While Petra remained in growth mode in FY 2017, achieving record production and revenue, the shortfall against guidance, in conjunction with the significant strengthening of the rand on our predominantly rand-denominated cost base, impacted our financial results for the year.

Dairy Crest has been finding it decidedly easier to do business in Nuneaton, and has invited analysts there today to prove it. But before they get to sample the cheddar, they have to have a nosey at the butter and cheesemaker’s trading update.

And it looks palatable: combined volumes of Dairy Crest’s four key brands – Cathedral City, Clover, Country Life and Frylight – are all on target to be ahead of last year. Cathedral City, the UK’s leading cheese brand, is expected to deliver double-digit volume growth in the first half.

However, as previously warned, higher cream prices led the company to reduce its promotional activity for Country Life butter – which hit its sales volumes, but reduced the negative impact on margins.

Dairy Crest’s pension concerns have also been alleviated by changing the index-linking of payments from the retail prices index to the consumer prices index. This change will result in an exceptional gain in 2017/18 of approximately £125m.

At the same time, the pension deficit has come down by £45m to £100m, as at March 2017, despite significantly lower gilt yields.

Chief executive Mark Allen, said:

Overall, first half profits are expected to be ahead of last year. Our profit expectations for the full year are unchanged despite input costs remaining high… We continue to focus on cash generation and on reducing net debt in the full year. The agreement reached with the trustee of the pension fund is an important development and significantly reduces future funding liabilities.

And, finally, insurer Hiscox has revealed the cost of doing business in the US: it forecasts claims of about $150m resulting from the impact of Hurricane Harvey on Texas last month.

This morning, the Bermuda-based company said it was exposed through its reinsurance business as well as insurance lines, including flood coverage for homeowners and businesses.

However, Hiscox stressed that the claims are “within the group’s modelled range of claims for an event of this nature, and reinsurance protections for the group remain substantially intact.”

But it is yet to announce claims estimates from Hurricane Irma, which hit Florida – and will only do so “once the impact of that storm has become clearer.”

Chief executive Bronek Masojada said:

Harvey has also highlighted the lack of flood cover for large parts of the US market… 2017 will be an expensive year for natural catastrophes but the industry can cope.

FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.

For the latest Lombard column commentary, click here.

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