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Mineral Resources share price declines despite record results

mining hat on lumps of coal representing mineral resources share price
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The Mineral Resources Limited (ASX: MIN) share price has fallen this morning despite the mining services company revealing its best full year result to date. At the time of writing, the Mineral Resources share price had dropped 1.7% to $28.36. Mineral Resources reported a 41% increase in revenue and a 127% increase in full year dividends, but this was not enough for investors who have sold off Mineral Resources shares. 

What does Mineral Resources do? 

Mineral Resources provides long-term contract services to Australia’s blue chip mining companies. The company has a portfolio of subsidiary businesses which offer a range of general mine services, contract crushing, infrastructure provision and recovery of base metals concentrate for export. Targeting stranded tenements and junior miners, Mineral Resources develops operations and secures life-of-mine contracts for its mining services business. 

How did Mineral Resources perform? 

Mineral Resources reported revenue of $2.1 billion in FY20, a 41% increase on FY19. This was driven by record mining services growth, higher tonnes in existing external contracts, and new external contracts won during the year. Statutory earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 420% to $2.01 billion with record iron ore sales and a strong achieved iron ore price. Underlying EBITDA grew by 63% to $334 million. This gave statutory NPAT of $1,002 million (up 507%) and underlying NPAT of $334 million (up 63%). 

Earnings per share increased 513% to 533 cents per share in FY20 and Mineral Resources will pay full year dividends of 100 cents per share, a 127% increase on FY19. Mineral Resources has demonstrated a strong financial performance since listing in 2006 at 90 cents per share. Over that time, earnings per share have grown at an annual rate of 30% per annum and total shareholder returns have grown at 27%  per annum. The Mineral Resources share price reflects this having gained more than 3000% over the past 14 years. 

What’s next for the Mineral Resources share price? 

Mineral Resource plans to double the mining services business over CY20 – CY22. Crushing and processing volumes are expected to increase with strong growth in contract mining and haulage thanks to new contracts signed in FY20. Mining services volumes are expected to increase 20% – 25% in FY21. In the commodity space, the company is developing mine operations with a 20 – 50 year life with a focus on iron ore. It is also working with the government to develop additional iron ore export capacity in the Pilbara. This would at least double current iron ore exports, with the first ore shipment planned in approximately 2 years.

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Motley Fool contributor Kate O'Brien 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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