8 Rules to Make Telecommuting Work

Culture is key at Blinds.com. But letting employees work from home is a crucial part of that maintaining that culture.

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Marissa Mayer, Yahoo’s CEO, is in good company by recently mandating that all employees report into the office rather than work from home. Zappos, famous for its culture, wouldn’t have become what it is with employees located off-campus in disparate locations. In fact, one of CEO Tony Hsieh’s rules for success is to maximize serendipity by creating the “opportunity for meaningful collisions.” People don’t collide when they’re miles apart.

We’ve won many awards at Blinds.com, including “Best Place to Work,” and it’s principally due to our culture. So you might think I’d be opposed to having people work at home–away from that culture.

But as CEO, the linchpin of culture development, about 25 percent of my own time is spent productively working from home when I need solitude to think without any distractions or have a personal appointment. So why can’t that work for my employees? I think it can–and it does. For the last three years, we’ve had about 20 percent of our workforce regularly working from home (WFH).

Here’s why I’ve come down on the side of WFH–and eight tips to make it work for you:

1. Understand WFH limitations.

Everyone needs to be conscious of creating effortless communication. We have all-hands meetings every Friday which will soon be live-streamed to all WFH employees. Our managers coach our sales and service decorators every week–either in person, or over the phone now using video. Are there times when we require all of our team to be physically present? Of course! I’m sure your office also has some trainings and conversations that just cannot be replicated virtually.  Know your limits for smart communication.

2. It’s not about control.

Many believe that the main reasons for requiring people to work in the office is to maintain better control and increase productivity.  If that’s your case, it might be that you don’t have the right environment, metrics, compensation, and culture in place. If you don’t get those right, it doesn’t matter where people work. Conversely, when done thoughtfully, giving people the freedom to work elsewhere can be more productive and great for retention too.

As Charles Handy wrote in his autobiography, Myself and Other More Important Matters, “…people know instinctively that there has to be trust if any organization is going to work… Yet organizations need trust if they are not going to clutter themselves up with rules, checks and checkers… trust them to be left alone to get on with it.” When your employees feel trusted, they’ll do what needs to be done–and more.

3. Trust, yet verify. 

Set guidelines and clear, objective metrics to be met, no matter where your employees work. And if those metrics are not met, the employee loses the privilege to work from home until those metrics are met. Shifting from an in-office to remote working experience won’t go perfectly on your first try. Provide the infrastructure and support your team needs to reach those high performance levels once more if they find roadblocks on the way.

4. When employees benefit, you benefit.

We have many employees with children or aging parents and when they get sick it’s an unnecessary hardship to leave them at home or be stressed about taking time off from work. So our “attendance” improves when our employees have the flexibility to work remotely, where they are needed most. Our IT team has configured the phone, email, and chat systems to seamlessly integrate WFH employees into the normal office queue. Customers get the same great service and many of our WFH employees remain in the top echelons of their departments, despite their varied locations.

5. Get reacquainted.

Require everyone on your team to come into the office at least once (or twice) per week to touch base in person. Absence makes the heart grow fonder, but extended absence also makes the culture grow weaker. Be sure your WFH team is included on in-office cultural activities; even they are not scheduled to be in the office, so they too have the opportunity to connect over some fun.

6. Appreciate the lower overhead costs.

Our business has now surpassed $100 million in sales, and we’re focusing on streamlining and scaling all processes. Allowing people to work from home saves overhead, so it’s a great way to build your business with lower costs and happier employees.

7. Use it as a way to increase the talent pool.

Think of the possibilities if you didn’t have to narrow your job candidates by zip code. Because of our WFH policy, we can hire people who aren’t in close proximity to the office, which means we have access to more talented people.

8. Don’t forget about a disaster recovery plan.

Every business needs to think about the unthinkable, when a fire, earthquake, flu outbreak, or any other wide-scale disruption could bring your business to a halt. The ability to have everyone work from home (which we have) allows us the peace of mind and financial security to endure such a catastrophe. In a couple of weeks we’re moving to a new office and during the transition, we’ll all be working from home for almost a week. WFH capabilities give us that flexibility.

Our turnover is under 5 percent and we’re anticipating another profitable year–no doubt due, in part, to our flexibility with our employees’ schedules. So maybe Marissa and Tony should think again. What do you think?

Starting a Company? 3 Things You Can’t Mess Up

Few start-up founders are clear-minded enough about three non-negotiable fundamentals.

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If there is one part of the economy that’s booming right now, it’s the start-up space.

A recent Wall Street Journal article pointed out that there is such a high demand for start-up funding that even hedge funds, private-equity firms, and sovereign-wealth funds are investing in closely held start-ups.

And yet the failure rate for new ventures remains defiantly high, at around 80 percent. (Most official agencies put the number at about two-thirds, 66 percent or so, but these are based on the failure rate of those start-ups that actually get around to registering with the IRS or other agencies. Anyone involved in the start-up industry knows that very many new ventures fail so quickly they never get around to filing with anyone, thus understating reported statistics.)

Why do so many new ventures fail, even with so much money available? Because few start-up founders are clear-minded enough about three non-negotiable fundamentals:

1. Get the team right. When it comes to maximizing the chances of success, most new venture teams are constructed almost randomly. Whether it’s dorm mates deciding let’s do this, or guy with money meets guy with idea, or frustrated employee strikes out on her own and takes colleagues with her, such groupings carry little assurance that the team will actually be capable of building a successful new venture.

There is however a founding team combination that works–one that we’ve looked at previously. Every successful new venture needs a Visionary and an Operator at its heart. Get those right, and you’re on the road to success; miss out on either one, and your start-up won’t make it.

Numbers count, too: after over 40 start-ups, my personal experience is that two founders (especially if they are the Visionary/ Operator combo) have a much higher success rate than one founder on their own; three have a better success rate than two; and adding more has little impact–in fact, founding teams of more than four people are more trouble than it’s worth.

2. Find a profitable, sustainable market. Here’s a flash of the blindingly obvious: for a start-up to succeed it must find a profitable, sustainable market.

You’d think there would be little confusion about this, but the reality is that most start-up founders either (a) fail to  see the fierce urgency of doing so, and instead get sidetracked by other non-essentials (new Aeron chairs – yippee!), or (b) compromise and end up with an unprofitable or unsustainable market, or (c) fall into the “Wal-mart just called” trap of mistaking a single big customer for a real, sustainable market.

Here’s a cheesy suggestion that works: Get an old-fashioned gong, or a bulb horn, or a boxing bell–anything that makes a loud noise–and use it every time you do something that gets you closer to finding your profitable, sustainable market (a mailout has a high response rate; a product launch flops; a beta tester gives great feedback – anything that provides actionable data). If a day goes by without you scaring the bejaysus out of your neighbors, be worried. If a week goes by, you need to radically change tack.

3. Get out of the start-up ecosystem. There has never been a time when there was more help available for start-ups. The infrastructure around new venture creation has become incredibly sophisticated with not just funding, but accelerator programs, mentors, coaches, contests, events, workshops, conferences–you name it, there’s a version for start-ups.

All of this help is fine in its place and at the right time. I was a co-founder of one of the earliest incubator programs way back in the 1980’s, and I know how powerful they can be. But if you’re serious about building a successful business your goal should be to graduate out of the start-up phase as soon as possible. 

Which means at the right time (i.e., as soon as possible) saying goodbye to the cozy environment of your favorite co-working space; not schlepping off to the next funky start-up conference; forgoing the late-night kibitzes with the latest batch of start-up newbies. Can’t let it go? Don’t want to leave the comfort of the start-up biosphere? Then maybe you’re a start-up junkie, and not a business founder after all.

Not a darn thing wrong with that, of course. Just don’t confuse the two.

4 Things Great Strategic Thinkers Do

Roger Martin, dean of the Rotman School, describes the four keys to great strategic decision making.

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To succeed as an entrepreneur, you know you have to be a bit of a visionary. You also, especially in your business’s early days, need to be a bit of a sales person, programmer, PR expert, internal travel agent, speaker’s bureau, and human resources department, to name just a few other chores.

Given all that, can you maybe leave the strategic thinking for later?

Well, no, says Roger Martin, the dean of the University of Toronto’s Rotman School of Management. Martin is out promoting a book on the topic that he wrote with the legendary former CEO of Procter Gamble, A.G. Lafley, called Play to Win: How Strategy Really Works. He blogged on the difference between strategy and execution for Harvard Business Review and is about to start a multi-year research project on the future of democratic capitalism–an inquiry so strategic, it’s practically metaphysical.

In Martin’s conceit, strategy is not complicated, or impractical, or disconnected from reality. And it’s certainly not optional. It’s all about making five straightforward choices: What’s your company’s purpose? Where will you compete? How can you win? What capabilities will you need? And what management systems must be in place? That’s it.

Strategy in action

As an example of strategy in action, Martin refers back to his pre-academic career as a consultant for the Monitor Group, working closely with consumer goods giant Procter Gamble. Sales of PG’s market dominant detergents (including the killer brand Tide) had flattened, and Monitor was called in to help PG figure out why. 

Martin didn’t have any particular insight himself, but he did observe that PG had not changed for decades how it dealt with its distribution.  PG saw its channels as divided into mass merchants, grocery stores, drugstores, convenience stores, and distributors that served mainly small storefronts. Without knowing the answer, Martin asked, “Is this really the best possible way to think of our channels?”

Siding with the winners

Turns out, it wasn’t. A study that Martin commissioned learned that the old approach totally missed the rapidly growing importance of WalMart, Costco and other “everyday low prices” (or EDLP) retailers. It turned out the big boxes were the fastest-growing (make that only growing) channel for PG products. Not only that: because they stocked only a limited number of top-selling SKUs, they were particularly well suited for PG’s monster brands like Tide.

Within months of Martin’s study, PG had reoriented its distribution strategy around two categories: EDLPs and “high-low” pricing outlets. (“High-low” referred to the practice of offering low prices at sales and high prices the rest of the time.) The company used co-marketing dollars it would otherwise have spent to support periodic sales–as it traditionally did at conventional “high-low” outlets–to give EDLPs the permanent low wholesale prices they sought.

Sales at last took off. “We were finally siding with the winners in the marketplace, rather than the losers,” he says. “It took our competitors a couple years to catch on to what we were doing.”

What lessons did Martin take away from that success? He cites four things:

Never assume that the conventional wisdom is right. Old ways of operation can be sticky. After all, they have their own built-in constituencies. In PG’s case, there were whole departments dedicated to planning sales promotions with “high-low” channels. They were threatened by a model that would render them at least partly obsolete.

Be willing to explore things that could turn into a dead end. Until the study was complete, neither Martin nor PG knew how much the EDLP stores were gaining on their conventional partners. “If you think you have it all figured out before you start your analysis,” says Martin, “you’re not going to solve any mysteries.” 

Project confidence. In the PG example, no one knew where the research would take them, which meant that Martin had to reassure them that it was worthwhile. “My case team was a little weirded out,” he recalls, “because I told them I’m not sure what we’d find. I never had doubts that it was essential for us to understand our distribution chain better. But I had to supply all the confidence.”

Don’t fall into the “execution trap”. This is a particular crusade of Martin’s. “Strategy is about making choices: We’re going to do this, and not that. How many strategies can you think of that allow people below the top level of the company to turn off their brain and simply ‘execute’ a strategy by rote? It doesn’t happen that way,” he says.

Instead, every member of your team makes choices in his or her daily job to implement the strategy. “Strategy sets off a cascade of choices from the top to the bottom,” he says.

But the process of making those choices all the way down the chain of command is not a separate thing called execution. He adds, “We have a crisis in business because companies focus on ‘execution’ separately from strategy. And the more we focus on execution, the worse the crisis is going to get.”

Strategy. It’s not just a good thing to have. It’s the one thing a winning company can’t do without.

Rewrite That Boring Job Description

Want to attract the A-players to work for your business? Here’s what needs to be in the job description.

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Job descriptions are the last thing most of us think about because with all the day-to-day busy work, who has time? We know we need to hire talented people, but most of us go with the standard, dry list of bullets on a website and hope that someone fits the bill.

Get Creative and Attract the Stars

Job descriptions are marketing just like when you’re describing your products or services, but even more important. Why? Just like you want to attract customers that come back again and again, you also want to attract A-players who love what you do, and love their job. Will they be attracted by a boring job description? No way. And what impression will a snoozer description give them of the type of company you are (when you’re probably very cool)?

Given my small business marketing company, VerticalResponse, is located in the Bay Area and we go up against Facebook, Google, Twitter and many others to find great talent, we need to be creative! So, what changes did we make?

We pay attention to our job descriptions and talk about our great company!

Here’s a sample:
VR people rock. We’re fun and diverse; we work hard and play hard. When we release a new feature or product into the wild, it’s immediately used by thousands of small businesses and non-profits. It’s nice to hear our customers say, “We can’t succeed without your marketing tools!” We’re both growing and profitable, which many companies just can’t say. Oh, and we have the best damn coworkers around!

We talk about our people, we talk about what we offer, and we feature things we’re proud of like our volunteering programs and the awards that we’ve won.

So What Can You Do?

Take a look at your own job descriptions. Now take a few minutes to look at some of your competitors and other top companies and see how their descriptions read. Pull some that you like for inspiration, then plan some rewrite time. Keep a good balance of sizzle and substance, as there’s still a job to be done. The more you can infuse your business’s personality into your job descriptions, the better you’ll be able to attract the type of person that’s going to do wonders for your biz.

Seal the Deal

Once you’ve written a great job description, posted it and found that awesome candidate that’s everything you dreamed they would be, make sure you seal the deal. We’ve been known to bring a candidate in for a series of interviews and hand them a job offer before they leave our office. We know the importance of making a special impression and how that gesture can seal a conversation with a candidate so they won’t consider another company/offer.

So be ready to make that offer to an amazing candidate. The days of leaving them guessing are over. When you find a star, make sure they know you want them and move mountains to make it happen. It can make a huge impression on a candidate when another company they’re considering may be dragging its feet, or going through a ton of red tape.

What are your thoughts on spicing up your recruiting efforts? Got a fabulous job description that stands out from the crowd? I’d love to hear in the comments.

Did you enjoy this post? If so, sign up for the free VR Buzz weekly newsletter and check out the VerticalResponse Marketing Blog.

8 Statements That Can Transform Your Work (and Personal) Life

Make a difference–at work, in your personal life, and in the lives of others. Say these vows to yourself daily–and then follow through.

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You can be an analytical, data-driven, steely-eyed businessperson all you like, but business is ultimately about people.

That means business is also about emotions: both yours and those of the people you interact with every day.

Want to make a huge difference in your life and in the lives of the people you care about, both professionally and personally?

Say these things to yourself every day–and then vow to follow through on the commitment you make:

I will answer the unasked question.

Maybe they’re hesitant. Maybe they’re insecure. Maybe they’re shy. Whatever the reason, people often ask a different question than the one they really want you to answer.

One employee might ask whether you think he should take a few business classes; what he really wants to know is whether you see him as able to grow in your organization. He hopes you’ll say you do and he hopes you’ll share the reasons why.

Your husband might ask if you thought the woman at the party was flirting with him; what he really wants to know is if you still think he’s flirt-worthy and whether you still find him attractive. He hopes you’ll say you do and he’ll love when you share the reasons why.

Behind many questions is an unasked question.

Pay attention so you can answer that question, too, because that is the answer the other person doesn’t just want, but needs.

I will refuse to wait.

You don’t have to wait to be discovered. You don’t have to wait for an okay. You don’t have to wait for someone else to help you.

You can try to do whatever you want to do. Right now.

You may not succeed. But you don’t have to wait.

Don’t wait.

I will appreciate the unappreciated.

Some jobs require more effort than skill. Bagging groceries, delivering packages, checking out customers–the tasks are relatively easy. The difference is in the effort.

Do more than say “thanks” to someone who does a thankless job. Smile. Make eye contact. Exchange a kind word.

All around you are people who work hard with little or no recognition. Vow to be the person who recognizes at least one of them every day.

Not only will you give respect, you’ll earn the best kind of respect–the respect that comes from making a difference, however fleeting, in another person’s life.

I will give latitude instead of direction.

You’re in charge. You know what to do. So it’s natural to tell your employees what to do and how to do it.

In the process you stifle their creativity and discount their skills and experience.

Letting another person decide how is the best way to show you respect their abilities and trust their judgment.

In a command and control world, latitude is a breath of freedom and is a gift anyone can give.

I will stop and smell my roses.

You have big plans. You have big goals. You’re never satisfied, because satisfaction breeds complacency.

So most of the time you’re unhappy because you think more about what you have not achieved, have not done, and do not have.

Take a moment and think about what you do have, professionally and especially personally. At this moment you have more than you once ever thought possible.

Sure, always strive for more but always take a moment to realize that all the things you have, especially your relationships, are more important than anything you want to have.

Unlike a want, what you have isn’t a hope, a wish, or a dream. What you already have is real.

And it’s awesome. And it’s yours.

Appreciate it.

I will look below the surface.

Sometimes people make mistakes. Sometimes they piss you off.

When that happens it’s natural to assume they didn’t listen or didn’t care. But often there’s a deeper reason. They may feel stifled. They may feel they have no control. They may feel frustrated or marginalized or ignored or not cared for.

If you’re in charge, whether at work or at home, you may need to deal with the mistake. But then look past the action for the underlying issues.

Anyone can dole out discipline; vow to provide understanding, empathy, and to help another person deal with the larger issue that resulted in the mistake.

After all, you might have caused the issue.

I will make love a verb.

You love your work. When you’re working that feeling shows in everything you say and do.

You love your family. When you’re with them does that feeling show in everything you say and do?

Hmm.

Love is a feeling, and feelings are often selfish. Turn your feelings into an action. Actively love the people you love. Show them you love them by words and deeds.

When you make love a verb the people you care about know exactly how you feel. Make sure they do.

I will be myself.

You worry about what other people think. Yet no matter how hard you try, you can’t be all things to all people.

But you can be as many things as possible to the people you love.

And you can be the best you.

Be yourself. That is the one thing you can do better than anyone else.

Antofagasta Doubles Annual Dividend But Writes Down Antucoya Value

Chilean miner Antofagasta PLC (ANTO.LN) Tuesday declared a better than expected full year dividend after the company produced record amounts of copper and gold last year.

But the company wasn’t immune to the challenges of escalating costs in the mining industry and reported a $500 million impairment charge against the value of its $1.7 billion Antucoya copper project, of which its attributable share based on a 70% economic interest in the project is $350 million.

Antofagasta suspended Antucoya in December in order to review the project’s escalating costs. The review is still continuing, the company said.

The U.K.-listed miner said net profit fell 16.5% to $1.03 billion in the 12 months ended Dec 31, missing analysts’ expectations of $1.36 billion according to a company poll of 18 analysts.

Excluding impairment charges, net profit rose slightly as sales climbed 10.9% to $6.74 billion and earnings before interest, taxes depreciation and amortization, or Ebitda–an earnings metric keenly watched by analysts–increased 4.6% to $3.23 billion, in line with analysts’ expectations.

The rise in both sales and Ebitda reflected a near 11% rise in copper output to 709,600 metric tons and a significant increase in gold output, which more than offset a 2% drop in the average realized copper sale price and higher on-site costs.

The strong operating results prompted the company to announce a special dividend of $0.775 a share, which helped more than double the company’s full-year dividend to $0.985 a share from $0.44 a share the year before, beating analysts’ expectations of $0.574 a share.

The company said the full-year dividend is a one off distribution, representing a 70% payout ratio of its net earnings, reflecting the year’s record output and strong cash position. It anticipates a return to a 35% payout level from 2013 onwards. The company had a net cash position of $2.4 billion at the end of December.

“The Group’s operations are performing well, and the commodity markets remain positive,” Antofagasta said. “These provide an excellent base to continue to realise fully the Group’s significant potential for further growth.”

Antofagasta said that copper output would be around 700,000 tons this year and remain at around that level for the next two to three years. Meanwhile gold and molybdenum output, by-products of copper production, are forecast to drop 13% and 34% this year respectively.

The lower by-products output is expected to raise cash costs net of by-products by 36% to $1.40 a pound of copper in 2013. This also reflects higher on-site costs at Esperanza and Los Pelambres.

Antofagasta said it’s still reviewing the capital expenditure program for its Antucoya project, which was due to complete construction by the second half of 2014 and ramp up to 80,000 tons of copper a year over the nine months thereafter. The project was touted as the company’s next notable growth project after ramping up its Esperanza mine in 2011. Antofagasta said it is incorporating additional drill results into its Antucoya review.

Antofagasta isn’t alone in feeling the pinch from escalating mining costs.

Miners around the globe have been grappling with rising costs after a decade-long rush to build new mines has resulted in stiff competition for a limited pool of skilled labor and higher prices for equipment and other inputs. The higher costs have led to margin squeezes at many miners particularly after last year’s drop in commodity prices.

Anglo American PLC (AAL.LN) incurred a $4 billion impairment charge against the value of its Brazilian Minas Rio iron ore project after raising the project’s capital expenditure budget more than three-fold from its original budget and extending the orignal date for first shipment by five years.

Antofagasta’s shares closed up 2.4% Monday at 1,095 pence a share, resulting in a market capitalization of GBP10.54 billion or $15.73 billion. Antofagasta’s shares are down 17.3% since the beginning of the year, due in part to its 2013 guidance and lower copper prices.

-Write to Alex MacDonald at alex.macdonald@dowjones.com

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MARKET COMMENT: Singapore’s STI +0.4%; Shrugs Off China Shares’ Fall

0751 GMT [Dow Jones] Singapore’s STI is up 0.4% at 3306.06, remaining resilient despite most regional peers slipping into the red in the wake of a selloff in China shares. The Shanghai Composite Index ended down 1.0%, or 23.99 points at 2286.60. “The STI has lagged the major global indexes,” including the DJIA and the SP 500, says Liu Jinshu, deputy lead analyst at SIAS Research. “Investors who put money in the STI are conservative,” diminishing the downside risk, he adds. Volume is on the sluggish side at 3.36 billion shares valued at S$1.03 billion. In the broader market, gainers top losers 1.5 to one. Resistance at the Feb. 4 high of 3319.19, also its highest since January 2008, likely won’t be tested during the session. Helping to support the index, the heavyweight banks are higher, with UOB (U11.SG), OCBC (O39.SG) and DBS (D05.SG) up 0.2%-1.5%. (leslie.shaffer@dowjones.com)

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MARKET COMMENT: Philippine Shares End Off 0.4%; 6700 Floor Tipped

0756 GMT [Dow Jones] Philippine shares finish lower Tuesday as some investors pocketed gains ahead of equity-raising plans by some listed firms. The benchmark PSEi is 0.4% lower at 6786.42. “To start out, the market is already overbought technically. Then you have stories of companies planning share sales,” says April Lee-Tan, research head at COL Financial. “This is just a short-term correction. Investors just want to protect their gains,” she adds. Volume is heavy. Decliners drowned gainers, 106 to 52, with major blue chips leading the market’s slide. Losers are paced by PLDT (TEL.PH) which is down 0.3% at PHP2,960, Ayala Corp. (AC.PH) 1.4% lower at PHP555, and gaming and resorts firm Bloomberry Resorts (BLOOM.PH) falling 4.1% to PHP14.96. Gold-copper producer Philex Mining (PX.PH) slides 5.2% to PHP18.10 after announcing a stock rights offering to raise PHP12.3 billion. Volume is heavy. Traders expect the PSEi to keep to the 6700-6900 trading range in the near-term. (cris.larano@dowjones.com)

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CaixaBank Plans Euro 5-year Covered Bond Issue

Spanish lender CaixaBank SA (CABK.MC) is planning a benchmark-size, euro-denominated, five-year covered bond, one of the banks running the deal said Tuesday.

Suggested pricing is in the area of 220 basis points over midswaps.

BNP Paribas, CaixaBank, Citigroup, Deutsche Bank and Societe Generale are lead managers of the sale.

The bond is expected to be rated A3 by Moody’s Investors Service and AA- by Standard Poor’s.

Write to Ben Edwards at ben.edwards@dowjones.com

Copyright © 2013 Dow Jones Newswires

Fresnillo Cuts Dividend By Nearly Half As Net Profit Drops

Mexican precious metals miner Fresnillo PLC (FRES.LN) cut its dividend by nearly half after reporting lower net profit Tuesday due to lower silver prices which more than offset higher gold prices and output.

London-listed Fresnillo, the world’s largest primary silver producer and Mexico’s second largest gold producer, reduced its full-year dividend to $0.579 a share from $1.0285 a share the previous year after reporting an 18.4% drop in net profit attributable to equity shareholders of $736 million for the 12 months ending Dec 31, 2012. The net profit figure beat analysts’ average expectations of $707 million according to a company poll of nine analysts.

Revenue fell 1.6% to $2.16 billion while a keenly watched profit metric, earnings before interest, taxes, depreciation, and amortization, or Ebitda dropped 14.8% to $1.31 billion, in line with analysts’ expectations.

The company said that the average realized gold price rose 5.6% in 2012 as gold output increased 5.4% to 473,034 troy ounces. But this was more than offset by a 9.8% drop in the average realized silver price as silver production dropped 2.1% to 41 million troy ounces, including silver from the Silverstream contract.

Cost inflation was 3.1% in 2012 due to rising labor and energy costs, the company said. However, the impact of this was mitigated in part by a 6% devaluation of the Mexican peso against the U.S. dollar during the year, it said.

The company also said that a new leaching plant at Herradura, which was due to start production in the first half of 2013, should now start commercial production in the fourth quarter of 2013 and that the project’s capital expenditure budget has increased by 8.6%.

The London-listed miner reaffirmed that it plans to produce 41 million troy ounces of silver in 2013, broadly flat on year, once the 4 million ounces from the Silverstream contract is taken into account. Output should remain steady as the expected ramp-up of its Saucito mine to about 8.5 million ounces of silver offsets an expected decrease in silver ore grade at the Fresnillo mine.

Meanwhile, gold output is forecast to rise 3.6% to 490,000 troy ounces from 473,034 ounces in 2012 as the company’s Noche Buena mine continues to ramp up production.

Fresnillo has seven producing mines, all of them in Mexico, two development projects, and four advance exploration projects. The company said it is on track to produce 65 million ounces of silver and 500,000 attributable ounces of gold annually by 2018 via nine growth projects.

Fresnillo is majority-owned by Mexico’s Industrias Penoles (PENOLES.MX), which spun off its precious metals holdings in a May 2008 initial public offering. The company is considering its options to increase its free float in order to remain a member of the FTSE 100 index. The company’s current free float is 22.86% and the FTSE requirement is to have a free float of 25% by the end of 2013.

Fresnillo’s shares closed Monday up 0.7% at 1,490 pence a share, resulting in a market capitalization of GBP10.61 billion. Fresnillo’s shares are down about 19% since the beginning of the year.

-Write to Alex MacDonald alex.macdonald@dowjones.com

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