Pilbara Minerals: Why the stock sold off despite record FY23 production and profits

Mon 28 Aug 23, 4:20pm (AEDT)
Red hills outback Western Australia WA
Source: iStock

Key Points

  • Pilbara Minerals reported strong FY23 results, with production and revenue up significantly year-on-year
  • FY24 capital expenditure guidance has come in substantially higher-than-expected, weighing in the stock's recent performance
  • Analysts believe that the higher capex is an industry-wide problem, but that the underlying lithium story remains bullish

An ‘exceptional’ FY23 performance from Pilbara Minerals (ASX: PLS) – where lithium production increased 64% and net profits jumped 326% to $2.4 billion – has triggered quite the opposite share price reaction, down almost 15% in the last two sessions.

The strong result versus tumbling share price scenario has left a lot of investors scratching their heads.

In this piece, we’ll break down all the moving parts to the result, what triggered the selloff and where to go from here.

FY23 results at a glance


  • Spodumene production of 620,100 tonnes, up 64%

  • Unit operating cost of $613/dmt, up 11%

  • Spodumene sales of 607,500 tonnes, up 68%

  • Average realised price of US$4,447/tonne


  • Revenue of $4.06bn, up 242% vs.the $4.08bn expected by analysts

  • EBITDA of $3.32bn, up 307% vs. $3.34bn expected

  • Underlying net profit of $2.28bn, up 329% vs. $2.28bn expected

  • Final dividend of 14 cents per share

FY24 Guidance

  • Spodumene production between 660-690,000 tonnes 

  • Unit operating costs between $600-670/dmt (US$390-436/dmt)

  • Capital expenditures of:

    • Growth capex $490-540m

    • Mine development $140 -160m

    • Sustaining capital $75-85m

    • Projects and enhancements $170-190m

What went wrong: FY24 guidance

“FY23 results, FY24 production, and FY24 cost guidance were in line with expectations however capital expenditure guidance was higher than expected,” Macquarie analysts said in a note last Friday.

“PLS reported total capex guidance of $875-975m in FY24 which was significantly higher than our previous estimate of $557m.”

At the midpoint, FY24 capex has come in 66% higher than expected. This has also created uncertainty about the company’s FY25 capex and as we all know, markets hate uncertainty.

“Due to the higher than expected capex in FY24, we increase our capex to A$935m in FY25 (previously ~A$462m) to account for the remainder of the P1000 project expenditure and "sticky" cost inflation,” the analysts said.

Capex – It’s a problem for everyone

“During the June reporting season, we note many miners have flagged that inflation pressures are expected to be sticky,” says Macquarie.

But it’s not just miners. And higher-than-expected costs have had a substantial impact on company share prices this reporting season. Some interesting examples include:

NextDC (ASX: NXT) FY23 guidance:

  • Revenue and underlying EBITDA guidance unchanged

  • Capex guidance upgraded to $620-670m from $380-420m

  • Capex guidance is 66-134% higher than Goldman Sachs, Morgan Stanley, Citi and Goldman Sachs forecasts

  • Shares opened 5.95% lower as the market opened on Monday, 28 August (day of the result)

On the flip side (and in an entirely different sector), Magellan (ASX: MFG) FY23 results and FY24 guidance: 

  • FY23 Net profit down 57% to $174.m, in-line with the $174.1m expected by analysts

  • FY23 expenses of $121.3m vs. $129.7m expected by Goldman Sachs

  • FY24 expenses guidance of $95-100m vs. $128.4m expected

  • Shares finished 13.3% higher on the day of the result (18 August)

Has the story changed?

Capex has become an industry-wide problem but does this alter the otherwise bullish lithium story?

“We don’t think the story has changed looking through FY24 estimates [of] single digit free cash flow; Pilbara Minerals is operationally ahead of peers, has a Tier 1 asset and a war chest of +A$3.4bn with the option to buy-back stock,” said Citi analysts.

While the underlying story remains the same, Citi trimmed its target price to $4.80 from $5.10 with a Neutral rating. 

PLS chart
Pilbara Minerals 12-month price chart (Source: Market Index)


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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