The Western Areas Ltd (ASX: WSA) share price pushed higher on Tuesday following the release of its full year results.
The nickel producer finished the day around 1% higher at $2.49.
How did Western Areas perform in FY 2019?
For the 12 months ended June 30, Western Areas posted sales revenue of $268.7 million and net profit after tax of $14.2 million. This was an increase of 8.2% and 20.3%, respectively, on the prior corresponding period.
The positive result was driven by a small increase in production to 21.7kt and a 4.1% lift in the average realised price of its nickel to $7.84 per pound.
And despite spending $99.3 million on capital, feasibility and exploration expenditure, the company finished the period with cash on hand of $144.3 million and no debt.
Western Areas' managing director, Dan Lougher, revealed that he was encouraged by the improvement in the nickel price environment and its positive impact on the company's financial performance.
He said: "Strong cashflow from our operating assets enables both continued investment in organic growth projects, such as Odysseus, and the maintenance of reasonable returns to shareholders. We continue to focus on operating our Forrestania assets as safely and efficiently as possible, while also entering the exciting development phase of the Odysseus mine at Cosmos. The recent completion of a new offtake agreement for our premium high grade, MREP nickel product was also an excellent outcome, seeding our direct involvement in the emerging EV battery market."
In FY 2020 the company expects a similar level of production and has provided a guidance range of 21kt to 22kt, with a unit cash cost of production in the range of $2.90 to $3.30 per pound. The latter compares to cash costs of $2.98 per pound in FY 2019.
Is Western Areas a buy?
One leading broker doesn't believe this result makes its shares a buy.
According to a note out of Goldman Sachs, whilst its result and guidance were largely in line with its expectations, the broker continues to believe it shares are overvalued at the current level.
After a quick look through its result, the broker has held firm with sell rating and $1.80 price target. This price target implies potential downside of almost 28% for its shares.
Instead of Western Areas, Goldman prefers BlueScope Steel Limited (ASX: BSL) and Woodside Petroleum Limited (ASX: WPL), and has buy ratings on both.
