The Iluka Resources Limited (ASX: ILU) share price could come under pressure after the miner released its results for the June quarter 2019 this morning along with figures for the first half of 2019. Here’s what you need to know.
About Iluka
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 products. Headquartered in Perth, Iluka has been operating for over 60 years, and currently operates in Australia and Sierra Leone.
The 5 Key Points
- Synthetic rutile production is down 24.2% year-to-date compared to the first half of the calendar year 2018
- Total mineral sands production is down 20.2% year-to-date
- Total mineral sands sales are down 24.2% year-to-date with rutile sales down the most (39.1%)
- First-half revenue per tonne increased by 30%
- Net debt was $142 million at 30th June 2019, compared to net cash of $2 million at 31st December 2018
High Prices Offsetting Low Sales
While production of rutile and synthetic rutile are both down, sales have suffered even more with mineral sands production down 20.2% and sales down 24.2%. Total cash costs have also increased from 1HCY18 to 1HCY19, up from $224.9 million to $251.8 million.
However, revenue per tonne has increased on the back of higher prices, leaving mineral sands revenue down only 10.1%.
Is Iluka A Buy?
A number of factors in this quarterly report appear to be red flags to me. Production and sales have both declined, net debt has increased, and revenue has declined.
The only reason revenue has been somewhat supported despite the drop in sales is the higher price received for zircon, rutile and synthetic rutile. However, Iluka notes that continued political and trade tensions have impacted demand, particularly for zircon.
If demand continues to decline, I can’t see how prices would remain high unless there’s some kind of disruption to supply.
The complete half-year results are scheduled to be released on 21st August 2019, so shareholders should see a clearer picture then.
For now, I’d much rather invest in one of the proven businesses in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
