Mineral Resources (ASX:MIN) share price slides as lower iron ore prices bite

Looks like it was a challenging period for Mineral Resources.

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Key points

  • Mineral Resources released its half-yearly results prior to the open
  • The company came in with mixed results, recognising a loss in both revenue and statutory profit
  • The Mineral Resources share price is dropping on the news

The Mineral Resources Ltd (ASX: MIN) share price is down more than 3% in early trading as the resources player released its half-yearly results prior to the open on Wednesday.

At the time of writing, the Mineral Resources share price is trading 3.06% lower at $56.11. It marks a significant recovery after the company's shares hit a low of $50.36 earlier this morning.

Let's take a closer look at the company's financial results for the half-year ended 31 December 2021.

Mineral Resources net loss after tax down 108%

The company outlined several progress points relevant to investors, including:

  • Revenue of $1.4 billion, down 12% on the previous year
  • Underlying earnings before interest, tax, depreciation, amortisation and impairment (EBITDA) of $156 million, down 80% year on year (YoY)
  • Underlying net loss after tax was $36 million, down 108% YoY
  • Statutory net profit after tax (NPAT) was also down 96% from the year prior, at $20 million
  • A return on invested capital (ROIC) of 23.9% "even in difficult conditions"
  • Increased Mining Services production volumes by 18% on the previous year
  • No interim dividend declared

What else happened this half for Mineral Resources?

The company's financials were earmarked by a 80% decrease in EBITDA to $156 million and a corresponding net loss after tax of $36 million – down a further 108% from the previous year.

This meant the company's statutory NPAT – income that includes 'exceptional items' – came in at $36 million, a whopping $500 million, or 96% decrease, on the prior corresponding period, as reported by the company.

This amount includes a "net post-tax fair value gain of $75million on listed investments mainly arising on the divestment…in Pilbara Minerals Ltd (ASX: PLS)" as well as a "net post-tax $19 million unrealised foreign exchange loss on the Group's USD denominated notes and cash holdings".

Aside from that, Mineral Resources exported 9.9 million wet metric tonnes (wmt) of iron ore and 207,000 dry metric tonnes (dmt) of spodumene for the period.

This enabled the company to deliver a ROIC of 24%, in what were otherwise "difficult conditions", according to the company. That figure is also up a few basis points from 23.4%.

Operating cash flow also ran a loss this half and was down 123% on the same time last year, whereas capital expenditures increased 15% to $403 million this half.

In other metrics, Mineral Resources maintained a "low 12-month rolling Lost Time Injury Frequency Rate (LTIFR) of 0.10 and [reduced its] Total Reportable Injury Frequency Rate (TRIFR) to 2.25".

Finally, given Mineral Resources' "capital investment programme", the net loss after tax in 1H22, and "volatile conditions in the iron ore market", the Board has refrained from declaring an interim dividend.

Management commentary

Speaking on the announcement, Mineral Resources managing director Chris Ellison said:

This has been a challenging half, as we continued to navigate the uncertainty of a COVID-19 world and maintained our focus on protecting the jobs of all our people. I am proud of the efforts of the more than 4,800 men and women in our business for their united and disciplined approach, which so far has enabled us to keep COVID-19 out of our operations. It hasn't been easy and the challenges during 1H22 were amplified by the collapse in iron ore prices. This has delivered our worst first half financial result in three years. These results do not reflect the substantial progress in our iron ore, lithium and gas businesses during the last six months which will create significant value for decades to come and which underpins our long-term growth for our Mining Services division.

What's next for Mineral Resources?

According to the company, it remains on target to meet its FY22 volume guidance. This constitutes a 15-20% increase for mining services, alongside spodumene export guidance of 450-475 ktpa.

Finally, the company reaffirmed "the revised full-year iron ore export guidance of 18.5-19.5 mtpa" in its announcement today.

Mineral Resources share price snapshot

In the last 12 months, before today's results were announced, the Mineral Resources share price had climbed 56%, rallying another 3% this year to date.

Those growth figures are being pulled back today, given this morning's earnings announcement.

At the time of writing, Mineral Resources has a market capitalisation of around $10 billion.

Motley Fool contributor Zach Bristow has no position 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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