Lynas Corporation’s profit declined more than half amid the setback in Malaysia operations

Lynas Corporation Limited (ASX: LYC) reported 62.6% decline in Net Profit for the period attributable to members to $19.02 million for the half year ended 31 December 2018. The news sent the stock price to crash 6.964% to trade at $1.670 on 28 February 2019 (2:07 PM AEST).

The Group’s revenue has declined by 10.5% to $179 billion, taking EBITDA to $50.79 million, down 38.8% in 1HFY19 compared to the previous corresponding period. Beside many other factors, the results outline the tough market conditions with the increased competition in the global rare earths market which has the potential to affect the rare earths prices adversely.

The negative performance of the Group further reflects the risk revolving around the entity’s ability to continue as a ‘Going Concern.’ Recently, Lynas’ Malaysia operations got thrashed by Malaysian environmental ministry who demanded the company to remove the residue of Water Leach Purification (WLP) from the land of Malaysia if it wants its Full Operating Stage License (FOSL) to get renewed by the due date of 2 September 2019. If compared to the current terms of FOSL, WLP residue should be recycled, and if that fails, then it should be stored in a Permanent Disposal Facility (PDF). The company told that export of WLP is only to be considered in the event neither recycling nor a PDF are possible.

Lynas Corporation CEO and Managing Director, Amanda Lacaze, said: “The company achieved good half-yearly result although it has faced many difficult regulatory and market conditions during the period. Its team delivered several key milestones including record REO sales volume and production, despite only being in production for 5 months of the half year.”

During the reporting period, Lynas’ total ready for sale production of rare earth oxide (REO) increased to 9,642 tonnes, compared to 8,839 tonnes in 1HFY18. The Group announced that over 600 tonnes of Neodymium-Praseodymium (NdPr) were produced in 2 consecutive months, i.e., September and October 2018, along with the successful start-up of new Nd and Pr separation circuit as part of Lynas NEXT. Not only this, the company has already produced and sold its first separated Nd product during the half year ended 31 December 2018.

On the balance sheet front, the company managed to generate robust cash inflows despite a fall in the NdPr China Domestic Price. Its Cash flows from operating activities was $41.2 million, primarily driven by the strong customer demand in the Japanese market.

The company did not determine or paid any dividend for the six months ended 31 December 2018. Lynas’ basic Earnings Per Share (EPS) declined to 2.87 cents in 1HFY19, compared to 10.49 cents in 1HFY18.

As per the company’s information, Lynas NEXT substantially complete at Lynas Malaysia with initiatives continuing at Mt Weld, Australia. And to support the delivery of increased NdPr production targets, Lynas commenced overburden removal for Mining Campaign 3 at Mt Weld in December. Commenced Mining Campaign 3 at Mt Weld.

With respect to FY19 outlook, Amanda Lacaze commented: “Despite the various challenges in this first half, the production run rate was excellent and reflected the improvements delivered by the Lynas NEXT project. This provides a strong foundation for continued improvements in the second half of the year.”

Disclaimer

This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.