Shares in Western Areas Ltd (ASX: WSA) were the centre of attention across the share market today.
During trade, the nickel producer turned over more than 45 million shares, making it the most traded company on the ASX for the day. However, the activity wasn't accompanied by a decisive view on the Western Area share price. The company's shares finished the day flat at $3.35 each.
So, why all the excitement? It looks like investors are having a delayed response to the company's half-year results that were released yesterday.
Let's take a closer look.
Western Areas shares attract an ASX crowd following half year boom
- Revenue up 48.3% over prior corresponding period to $181.9 million
- Nickel concentrate production up 7.4% to 7,800 tonnes
- Nickel concentrate sales up 14.5% to 8,500 tonnes
- EBITDA increases nearly three-fold to $71.6 million on a 39% margin
- Net profit after tax (NPAT) swings from a $12 million loss to a $18.8 million profit
- Average realised nickel price of $12.57 per pound, compared to $9.83 per pound in prior year
What else happened during the half?
The half-year period ending 31 December 2021 was a busy one for Western Areas and its mining operations.
As the increasing demand for nickel has been met with constrained supply, the company took advantage of the opportunity. According to the release, ASX-listed Western Areas upped its production and recovery to yield a 14.5% increase in sales volume.
However, the company notes that an 820-tonne shipment recognised during this reporting period was predominantly produced in FY21.
Additionally, a 28% uplift in the realised nickel price assisted the company's cash flows during the first half. Specifically, cash flow from operations skyrocketed 140% to $66 million.
Despite pouring $68.6 million into growth and capex towards the Odysseus nickel project, costs rose a marginal 7.7%. Part of the increase in costs was attributed to a tight labour market in Western Australia.
What did management say?
Highlighting the achievements at the Odysseus project, Western Areas managing director Dan Lougher said:
We are very pleased to see Odysseus continue to hit important milestones, not least of which included first ore from Odysseus South, along with the raise bore shaft continuing to meet specifications as it is extended. Works for the winder house associated with the shaft are well underway, and refurbishment of the existing mill has commenced. In all, we have significantly de-risked the Odysseus development during the half, passing a number of key milestones without incident.
However, it seems Western Areas will also feel the pressures of inflation. Lougher said:
In the context of the tight labour market conditions in Western Australia, we have been focussed on managing costs and maximising productivity to take maximum advantage of the very strong nickel price for the half. However, cost inflation and labour shortages mostly associated with COVID-19 are likely to impact the second half of FY22 performance.
What's next?
There are two important items ahead for ASX-listed Western Areas. The first development will see IGO Ltd (ASX: IGO) takeover Western Areas in a deal priced at $3.36 per share.
The deal looks likely to proceed after Andrew Forrests' Wyloo Consolidated backed the acquisition last week.
Secondly, the company revised its FY22 guidance due to COVID-19-related productivity issues. As a result, Western Areas now expect nickel concentrate production of between 15,200 tonnes and 16,200 tonnes compared to 16,000 and 17,000 previously.
How have Western Areas shares performed on the ASX?
Shareholders of Western Areas shares can count themselves as outperformers over the past year. While the S&P/ASX 200 Index (ASX: XJO) returned 6.3%, the nickel producer delivered a 29% gain.
The resilient commodity market has carried over into 2022, with the company's shares continuing to hold up better than the broader Australian share market.
