Iluka Resources Limited (ASX: ILU) released its quarterly review for the period to 31st March 2019 this morning. Here’s what you need to know…

Iluka is a resources and mining company focused on minerals zircon, rutile and synthetic rutile which are used in ceramics, pigments and optical equipment, among other uses. Headquartered in Perth, Iluka has been operating for over 60 years, and currently operates in Australia and Sierra Leone.

The 3 Things You Need To Know

  • The 45-day major maintenance outage has been completed on the synthetic rutile kiln
  • Zircon/Rutile/Synthetic Rutile (Z/R/SR) production down 17% from December quarter
  • Z/R/SR revenue and sales lower than December quarter, down 27.9%

What It Means…

The first thing to note from Iluka’s report is that lower production was expected this quarter. Zircon sales, which make up the highest percentage of revenue, follow a seasonal pattern and are typically lower in the first quarter.

The major kiln maintenance also impacted production but was necessary to prepare for the coming years.

Although sales were expected to be below December 2018 results, it is also worth noting that results were far below March 2018 results as well. Total mineral sands sales were down 19.3% on the March 2018 result and revenue was down 5.3%.

Iluka said in the announcement that production was in-line with expectations and they are on track to meet full-year guidance.

While they said that underlying demand appears to be stable, the report also highlighted that, “buying activity remains slow in some sectors and geographies as global political tensions and trade uncertainties, against a backdrop of modest economic growth, continues to impact sentiment”.

My Take

Although production was expected to be lower than the December quarter the drops are quite significant.

Iluka relies heavily on commodity prices and exchange rates to maintain margins. While share price performance has been positive year-to-date (up 26%) this report hasn’t provided much to fuel the fire.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.