Reporting Season

Iluka’s slide defies strong operating performance

Thu 24 Feb 22, 1:27pm (AEST)
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Key Points

  • Iluka’s share price was down -3.59% at noon
  • Underlying net profit after tax of $315m, 108% up on 2020
  • Lower-than-expected full-year dividend of 12 cents per share

Iluka Resources (ASX: ILU) reported a full-year 2021 underlying net profit after tax of $315m, 108% up on 2020, in line with brokers’ expectations of $310m, while its mineral sands revenue increased 57%.

The Perth-based mineral sands miner also declared a lower-than-expected full-year dividend of 12 cents per share, against an average of nearly 16 cents per share expected by analysts.

Underpinning the net profit result was a jump in prices for zircon over the year, plus an 11% decline in the company’s cost of goods sold to $916/tonne.

Key results included:

  • Operating cash flow came to $528m, up 189%

  • Underlying earnings (EBITDA) of $652m, up 54%

  • Reported NPAT dropped from $2.41bn to $366m

The substantial drop in NPAT can be attributed to the $2.24bn payday recorded during 2020 on the demerger of Deterra Royalties Ltd (ASX: DRR) within which Iluka retained a 20% holding.

Return to capacity

Today’s result reflects Iluka’s return to near-maximum capacity in production, after the initial onset of covid in 2020 tempered demand for zircon from ceramics makers.

In a separate results presentation released today, Iluka predicted that global market supplies of zircon and high-grade titanium feedstocks would tighten due to depletion of existing mines and a short pipeline of replacement projects. 

The company foresees global zircon production falling from about 1.2m tonnes per annum in 2019, to about 600,000 tonnes by 2024.

Iluka also expects global production of rutile, used in titanium production and other applications, to fall to around 300,000 tonnes per year, from near 600,000 in 2019.

Moving forward

Iluka also highlighted progress within its various pipeline projects. The company confirmed a definitive feasibility study for its NSW Balranald rutile project was underway, with a final investment decision expected by the end of the year. 

Meantime, at its Victorian Wimmera zircon and rare earths project, the company said it was studying ways to refine deposits to extract uranium impurities, which would make the product ineligible for sale in most global markets.

Iluka also confirmed that a pilot study started last year had produced purified zircon, and test work would continue throughout 2022.

The company also confirmed that current chairman, Greg Martin, will retire from the board in April, to be replaced by current board member Rob Cole.

Strong operating performance

Commenting on today’s result Tom O’Leary, Managing Director noted:

“Iluka delivered an excellent result in 2021 underpinned by strong operating performance, increasing demand and observable supply-side challenges across the mineral sands industry.”

O’Leary also noted that while tile manufacturers in many geographies maintained high levels of demand [for zircon] after rebounding to pre-pandemic levels of production in the first half of the year, tightness is also a feature of the high-grade titanium feedstock market - with demand in all regions continuing to outstrip supply.

Iluka’s share price was down -3.59% at noon today.

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Iluka was sold off in early morning trading

 

Written By

Ben Seeder

Journalist

Ben is a freelance contributing editor based in Tasmania. He has a Bachelor's Degree in Journalism and Government from the University of Queensland, and is a small-cap stock-picker.

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