Nexa's Q2 US$286 Million EBITDA Looks Strong-But Is It a Real Operating Turn, or Just a Commodity Bump?

Nexa's Q2 improved, but the quarter alone does not settle the story

Net income of US$98 million was well above the US$13 million posted in 2Q25, and adjusted EBITDA reached US$286 million. Those figures matter because they line up with improved ore grades across all five mines, stronger operating execution, and net leverage improved to 1.4x. Taken together, they suggest Nexa's business is getting better, not that the investment case is fully settled.

Part of the improvement still reflects a favorable price environment and by-product credits, so the bear case has not disappeared. The useful distinction now is whether these results are coming from a cleaner operating base or only from a strong commodity window. If Nexa can avoid another community-related events or extreme weather shock, this quarter looks more like the start of a better year than a one-off headline.

At Aripuanã, Nexa reached a quarterly production record of 13,000 tonnes of zinc, while the plant was running at 86% average capacity utilization. Those are concrete signs that the asset is functioning better, not just sounding better in commentary.

Peru also looks more stable than in recent periods. Treated ore volumes increased 11% sequentially, which suggests the operation is no longer suffering the same degree of quarter-on-quarter disruption. That does not eliminate Peru risk, but it does make the recovery look more real.

Why profit grew faster than revenue

Adjusted EBITDA rose 78% year over year while net revenue increased 28%. Nexa linked that spread to a higher share of zinc concentrate from its own mines, lower operating costs, and better ore grades. The basic implication is straightforward: more of the volume coming through the system is lower-cost and higher-value, which helps margins.

The balance sheet is less of a distraction

The leverage picture has improved materially, from 2.28x a year ago to net leverage improved to 1.4x. That does not remove financing considerations entirely, but it does reduce the risk that debt becomes the first thing investors focus on.

Operational recovery is visible in output, margins, and the balance sheet

Aripuanã and Peru are both showing cleaner execution

Cash generation is also looking cleaner. Cerro Lindo silver streaming stepdown became effective in May, and approximately $100 million in additional annual cash flow at current prices is a meaningful support for the outlook. Still, none of this is automatic: the outlook still depends on Nexa keeping community-related events or extreme weather from interrupting production and on metal prices staying supportive.

The main doubt is durability: smelting pressure and Peru risk still matter

Smelting margins remain the weak link

A strong quarter does not erase the fact that smelting economics can stay weak even when volumes improve. The Smelting segment volumes recovered, but margins remain pressured by historically low global treatment charges (TCs). That is the core reason investors should be careful about treating this quarter as a full endorsement of durability.

Another reason is cash flow fragility. Free cash flow was negative $10 million due to a $131 million tax settlement payment in Peru; excluding this, it would have been positive $120 million. In other words, one non-recurring payment in Peru changed the picture enough to remind investors that cash generation is still vulnerable to regional shocks.

What would make this quarter more convincing

The next few quarters need to answer two questions: whether Peru stays stable, and whether Nexa can convert stronger operating performance into cleaner cash flow without another surprise hit. If the company can do both, this quarter starts to look like the base for a better year rather than simply a strong quarter in a good market.