The share price of Iluka Resources Limited (ASX: ILU) has fallen over 10% in response to the company’s half-year result to 30 June 2019.
The mineral sands business reported a revenue drop of 10.1% to $545.6 million. The reduced revenue was due to lower zircon sales, partially offset by price growth across all major products. Zircon and rutile prices were up 19% and 22% respectively. The ongoing trade war is causing uncertainty in the market.
Iluka’s underlying mineral sands earnings before interest, tax, depreciation and amortisation (EBITDA) only dropped by 6.7% to $232.7 million. EBITDA fell less than revenue because the mineral sands EBITDA margin improved by 160 basis points to 42.7% from 41.1% in the prior corresponding period.
The company reported a $41 million contribution from the MAC (Mining Area C) royalty, which was 41% higher due to stronger iron ore prices.
Underlying group EBITDA declined by 1.7% to $273.9 million and net profit after tax (NPAT) rose by 8.8% to $137.2 million. Operating cash flow dropped 41.3% to $179.9 million.
Iluka decided to cut the interim dividend by 50% to 5 cents per share. Net debt was $141.5 million at the end of the half-year, worsening from a net cash position of $1.8 million at 31 December 2018.
However, Iluka did say that the Cataby mine development has been completed on schedule and on budget. Management said that the Gangama expansion has been commissioned and the Lanti expansion is in commissioning.
Zircon sales are expected to be at the lower end of expectations in the second half, with higher depreciation and amortisation expected in the second half as well.
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