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Lynas announces FY 2020 results and $425 million equity raising

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The Lynas Corporation Ltd (ASX: LYC) share price won’t be going anywhere today after requesting a trading halt.

The rare earths producer requested the trading halt following the release of its full year results and the announcement of a major equity raising.

FY 2020 results.

For the 12 months ended 30 June 2020, Lynas delivered revenue of $305.1 million and earnings before interest, tax, depreciation, and amortisation (EBITDA) of $59.8 million. This was a 16% and 40.6% decline, respectively, year on year.

Management advised that this weak result was caused by temporary production halts and weak market conditions during the year.

Also falling heavily was its cash flows from operating activities. They came in at $32.1 million, down from $104.1 million in FY 2019. Though, things would have been worse had it not been for the company’s focus on cost management during the year.

This left Lynas with a cash balance of $101.7 million at the end of FY 2020.

Lynas CEO and Managing Director, Amanda Lacaze, commented: “Our company entered the COVID-19 pandemic in robust financial shape, as a result of a number of years of prudent capital management. However, our FY20 financial performance has been affected by the COVID-19 related shutdown as well as lower market prices and the temporary production halt in December after we reached the annual concentrate processing limit for calendar year 2019.”

“While this was disappointing, we have built a resilient business and despite the lower market pricing, our performance in quarters not affected by the production halts remained strong. This resilience was also shown in the way our people quickly adapted to new ways of working and new COVID-19 protocols to protect the health and wellbeing of all staff,” she added.

Equity raising.

In addition to its results, Lynas has announced a fully underwritten equity raising to raise approximately $425 million.

Lynas is raising the funds via a 1 for 7.7 pro-rata accelerated non-renounceable entitlement offer and institutional placement at an issue price of $2.30 per share. This represents an 11.9% discount to last close price.

Proceeds from the equity raising will be used to fund major projects that are expected to be delivered in 2023 and will be essential steps towards the Lynas 2025 growth vision. These include the planned Kalgoorlie Rare Earth Processing Facility and associated upgrades at the Lynas Malaysia Plant.

CEO Amanda Lacaze commented: “The Lynas 2025 growth vision announced in May 2019 is an exciting opportunity to transform our business and grow with our key markets. Advanced manufacturing supply chains need Rare Earths and COVID-19 has brought into sharp focus the need for resilient and diversified supply chains.”

“Lynas is ideally placed to meet this need as we are a proven and profitable operation and the only significant producer of separated Rare Earths outside of China. By strengthening our balance sheet, we can mitigate global economic uncertainties and continue to progress our foundation project which is the Kalgoorlie Rare Earth Processing Facility. This facility provides the opportunity to develop a Critical Minerals processing hub in the Goldfields. The project has received strong support from the Kalgoorlie-Boulder City Council, Western Australian and Australian governments,” she concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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