Allkem share price on watch amid a record year

Will a record year be enough to please Allkem shareholders today?

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Key points

  • The Allkem share price is on watch this morning as investors digest its FY22 results
  • Allkem achieved record production and revenues after, boosted by its Galaxy Resources merger
  • Labour shortages have resulted in reduced production guidance at Mt Cattlin for FY23

The Allkem Ltd (ASX: AKE) share price will be a hot topic today after the company handed down its full-year results for FY22.

Shares in the multi-billion dollar lithium miner rallied 5.5% yesterday to $13.88. By the looks, investors were eager to load up ahead of earnings today.

All eyes on Allkem share price

  • Record annual production from Mt Cattlin and Olaroz
  • Group revenue up 9 times year on year to US$770 million
  • Gross profit up 13 times to US$605 million
  • Group net profit after tax (NPAT) up 4 times to US$337 million
  • Cash and cash equivalents of US$664 million as at 30 June 2022, up 3 times

It is important to note, the incredible increases across most figures are primarily attributable to a change in the company. On 25 August 2021, Allkem (formerly Orocobre) merged with Galaxy Resources. Hence, this is the maiden full-year result as a combined entity.

What else happened in FY22?

The latest financial year was one of substantial growth and development for Allkem. Most notably, the integration of Galaxy Resources helped the company realise record production volumes and revenue.

According to the report, Mt Cattlin achieved 193,563 dry metric tonnes (dmt) of spodumene production. In addition, Allkem's Olaroz project pumped out 12,863 tonnes of lithium carbonate.

Record production and sales were also bolstered by attractive lithium prices, boding well for the Allkem share price. For example, the company snagged an average price of US$2,221 per tonne for its spodumene at a gross cash margin of 80%.

Astonishingly, the average realised price for its lithium carbonate flew 370% higher to US$23,398 per tonne.

On the development front, Allkem has made substantial progress in FY22. Some worthy mentions include:

  • Olaroz stage 2 over 91% completion
  • Naraha lithium hydroxide plant construction completed
  • Construction at Sal de Vida commenced in January

These developments are expected to aid in Allkem's endeavour to triple lithium production by 2026.

What did management say?

Commenting on the record results, Allkem managing director CEO Martin Perez de Solay said:

We achieved record revenue for the Group, not only from strengthened pricing but from successfully and safely producing high-quality lithium products from our global operations that have managed costs, improved safety performance and delivered record production during a period of supply chain disruption, labour shortage, high inflation and ongoing COVID-19 impacts.

Touching on the company's developments Perez de Solay stated:

With two revenue-generating operations being supplemented by new operations in FY23 and a strong balance sheet, we are fully funded to complete construction at Sal de Vida and the development of James Bay.

What's next?

Allkem provided a production guidance update in a separate release this morning. The company highlights the impacts of ongoing labour shortages as a reason for reviewing its FY23 production guidance.

As a result, consequential delays at Mt Cattlin have led to new guidance of 140,000 to 150,000 tonnes. For context, this compares to the previous 160,000 to 170,000 range. Furthermore, Allkem is in talks with customers to offload 100,000 tonnes of lower-grade spodumene at the moment.

Nevertheless, the company is forecasting a solid lithium market ahead.

Allkem share price snapshot

Allkem shareholders have revelled in the momentous boom in lithium recently.

Unsurprisingly, the Allkem share price has been no different. Since the start of the year, shares in the lithium producer have surged 24%. For reference, the S&P/ASX All Ordinaries Index (ASX: XAO) is 8.6% in the negative.

Motley Fool contributor Mitchell Lawler 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 Scott Phillips.

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