Deterra (ASX:DRR) share price lifts after successful demerger

Deterra was spun off from Iluka Resources in October 2020.

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The Deterra Royalties Ltd (ASX: DRR) share price has stepped into the green as the Australian mining player reported its FY21 earnings.

Deterra share price lifts on strong revenue and NPAT

Deterra detailed a number of progress points in their report:

  • Successful execution of demerger and ASX listing of Deterra
  • Revenue of $145.2 million with net operating profit after tax (NPAT) of $94.3 million
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $135.5 million at a post-demerger margin of 96%
  • Declared final dividend of 11.52 cents per share (fully franked) distributing 100% of NPAT
  • Mining Area C (MAC) South Flank achieved first ore in May 2021 – growth of 80 million wet metric tonne per annum new capacity underway

What happened in FY21 for Deterra?

Deterra was successfully spun off from Iluka Resources Limited (ASX: ILU) and the board plus management team are “fully in place”.

Moreover, Deterra delivered revenue of $145 million “at a post-demerger (EBITDA) margin of 96%”. As a result, the company recognised NPAT of just under $95 million, a significant 270% growth from the year prior.

In addition, the company recognised underlying EBITDA of $111 million, up from $24 million pre-demerger.

Deterra also announced a final dividend of 11.52 cents per share franked at 100%. The annual dividend for FY21 came in at 13.97 cents per share, and will be paid via the company’s “dividend policy of 100% of NPAT”.

The dividend payment date is 22 September, and the funds will arrive in shareholders’ bank accounts on that date.

What did management say?

Deterra managing director Julian Andrews said:

The successful demerger of Deterra Royalties has brought a lower-risk, higher-margin way to invest in the resources sector to the ASX. We offer investors strong visibility on earnings, cash flow and dividends, without the same exposure to operational and capital risk as traditional miners. Our simple business model has demonstrated its ability to deliver strong financial performance and I am pleased to note that the Directors have declared a final dividend of 11.52 cents per share, fully franked.

Furthermore, regarding Mining Area C, Andrews added:

In addition to the benefits of the royalty business model, our shareholders will receive direct benefit from the projected growth in production at Mining Area C, where the globally significant South Flank expansion produced its first iron ore in May.

What’s next for Deterra?

Deterra is “targeting net-zero operational greenhouse gas footprint” by the end of FY22, as per the release.

Furthermore, it has established “new ESG assessment criteria” for its new investment allocations.

Whilst it did not give specific earnings guidance, the company did emphasise it was “committed to sustainable shareholder returns”.

In addition, it remains committed to returning dividends at 100% of NPAT in FY22.

Deterra shares are 1.74% up on the day.

Moreover, the Deterra share price has posted a loss of around 9% this year to date, extending the previous 12 months’ 5% drop.

These returns have lagged the S&P/ASX 200 Index (ASX: XJO) return of around 25% over the past year.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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