All You Need To Know About The Agriculture Chemicals Company: SIRIUS MINERALS PLC (SXX)

Business Overview

Sirius Minerals Plc (SXX.L), formerly known as Sirius Exploration Plc is a fertiliser development company. The company undertakes the business of evaluation and exploration of resource properties in the UK. It holds interests in North Yorkshire polyhalite project, which produces polyhalite, a unique multi-nutrient fertiliser containing potassium, sulphur, magnesium and calcium. Sirius Minerals constructs Woodsmith Mine, located in the south of Whitby, North Yorkshire to extract polyhalite, and a tunnel system to transport it to a material handling facility and harbour at Teesside. The company through its projects serves local, regional and national economies. Sirius Minerals was formed in 2003 and is headquartered in London, the UK. 

Key Products & Services

Products – Fertilizers and Polyhalite

Services – Extracting Services and Materials Handling Facility

Recent Developments

• On 26^th November 2018, Sirius Minerals Plc acquired remaining 30 per cent stake in Cibra Group Companies and issued 95 million ordinary shares in Sirius Minerals.
• On 12^th November 2018, Sirius Minerals completed procurement of Mineral transport system with STARABAG.
• On 5^th November 2018, Sirius Minerals Plc has signed an Engineering, Procurement and Construction contract with Jacob UK Ltd for the materials handling facility at Wilton.
• On 17^th September 2018, Company signed its largest 2.5mtpa POLY4 supply agreement in Brazil and South America.
• On 14^th September 2018, received royalty funding from Hancock for US$250m, decided as a part of stage 1 financing.

 (Source: Company filings, LSE)

Top Shareholders

 (Source: FT, data from 31 Dec 2018- 04 Feb 2019)

 Financial Highlights – H1FY18

(Source: Company filings, LSE)

Commentary

• Operating loss for H1FY18 was £10.8 million as compared to £14.7 million in the corresponding period of the previous year. Operating loss reduced in H1FY18 mainly on account of reduction in one-time charges incurred in FY17.
• Sirius Minerals reported a total loss of £95.3mn in H1FY18 compared to £151.2mn during the corresponding period of the previous year, due to fair value loss on the derivative instruments and to some extent, the royalty financing.
• The company has invested £148m during the first half to develop projects.
• During the first half of the year, Sirius Minerals has made significant progress on its construction activities.
• In the late June of 2018, Company started its MTS tunnel portal piling work at Wilton.
• As on 30^th June 2018, Company’s Cash and cash equivalent position stood at £240.9m.
• Basic loss per share for H1FY18 stood at 2.1 pence, compared to the loss per share of 3.6 pence during the corresponding period of the previous year.

 

One Year Stock Performance

(Source: LSE)

Price Performance

• During the last one-year stock have reached a 52w High
• of GBp39.8 and a 52w Low of GBp18.6.
• At the closing price (as on 21^st Feb,19), the share was trading 49.06 per cent lower than its 52w High and 8.78 per cent higher than its 52w low, that indicates the stock is oscillating around its 52w low and it could hit another low.
• Dividend yield stood at zero, as the company is in a substantial loss.
• Stock’s Beta of 2.09 makes it highly risky or volatile against the benchmark.
• One-year return of Sirius shares stood at negative 18.67 per cent.
• Total outstanding market capitalization was around £973.80 million.

Key Risks of Sirius Minerals Plc

• Uncertainties around the Brexit deal.
• Liquidity risks
• Commodity price risks (mainly fall in Potash & Polyhalite prices)
• Permits and Licences
• Forex risks (primarily, non-US currencies and Sterling Pounds)

Conclusion

Sirius Minerals Plc remains on track  to deliver its polyhalite and commercial production on time, construction activities during the H1 FY18 progressed in line with 2018 guidelines.