The IGO Ltd (ASX: IGO) share price is starting the week in the red.
In morning trade, the battery materials producer's shares are down 3.5% to $10.28.
This follows the release of the company's first-quarter update.
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IGO share price falls on quarterly update
For the three months ended 30 September, IGO reported the following compared to the previous quarter:
- Sales revenue up 3% to $248 million
- Underlying EBITDA down 42% to $362 million
- Record underlying free cash flow up 39% to $530 million
- Cash up 4% to $804 million
What happened during the first quarter?
During the three months, lower production at Nova and Forrestania due to "difficult operating conditions" led to IGO reporting a 25% reduction in nickel production to 7,131 tonnes.
Offsetting some of this was its lithium business, which reported a 5% lift in spodumene production to 414,000 tonnes. Management advised that its Greenbushes operation achieved record spodumene production with lower cash costs.
In addition, there was an improved operating performance at Kwinana, with 607,000 tonnes of lithium hydroxide produced during the quarter.
Though, the strong lithium form may not last. Management advised that volatility in the lithium sector is being monitored closely and that it suspects that its spodumene sales will be impacted in the December quarter.
Finally, as you might have noticed at the top, IGO's earnings and free cash flow was greater than its sales. That was because the company received a record quarterly dividend of $578 million from its Tianqi Lithium Energy Australia (TLEA) joint venture.
Management commentary
IGO's acting CEO, Matt Dusci, was pleased with the strong start to the year. He said:
FY24 has commenced strongly for IGO, with a clear highlight being the exceptional free cash generation of our Lithium Business which drove a Group underlying free cash flow result of $530M for the September quarter. Underlying EBITDA of $362M was lower than the prior quarter, reflecting lower prevailing spodumene pricing and a softer performance from our Nickel Business.
However, Dusci warns that the current quarter could be very challenging. He adds:
Looking ahead, we note the recent volatility in the lithium market and the impact this is having on participants across the supply chain, a dynamic which is not unexpected for a market which is growing rapidly. Greenbushes shareholders are working on mechanisms to manage surplus volumes to minimise any impact to operations, however IGO notes that December quarter spodumene sales from Greenbushes are likely to be lower than production due to the deferral of some product shipments during the current quarter.
