China's Mineral Sands Hunger Boosts Lluka

   Date:2012-02-23

China’s hunger for mineral sands has helped propel Iluka’s 2011 full year net profit 15 times higher from the previous year.

Iluka this morning posted a net profit of $541.8 million for calendar 2011, up from $36.1 million in 2010.Mineral sands such as zircon and titanium dioxide are booming, with prices more than doubling and China leading the demand to use it in paints, electronics, nuclear reactors and deodorants.

Minerals sands earnings before interest and tax (EBIT) increased to $737.3 million, from $31.6 million in 2010.

The company’s royalty earnings from its lucrative 1.25 per cent stake in BHP Billiton’s Pilbara Mining Area C iron increased by 16.1 per cent to $88.1 million. That was due to a 3.2 per cent increase in sales volumes and an 18.9 per cent increase in the average realised iron ore price.

Group EBIT was $790.3 million, compared to $86.1 million in the previous corresponding period. Iluka’s net profit was also driven by higher production, at 158,000 tonnes of mineral sands, which increased by 15.6 per cent during the period.

Cash costs also increased by 15.6 per cent, to $628.9 million, but the unit cash cost per tonne of production was unchanged at $538 per tonne.

Mineral sands revenue increased 75.7 per cent to 662.3 million, with overall revenue of $1.631 billion up 69 per cent from 2010. This was due to higher prices for zircon, rutile and synthetic rutile products, offset by a stronger Australian dollar.

Investment research house Morningstar analyst Mathew Hodge said the result was better than expected. Mr Hodge noted that the outlook had softened a touch, with zircon production guidance lowered from about 550,000 tonnes to 500,000 tonnes in the 2012 financial year.

‘‘Iluka says sales volumes could be about 10 per cent lower than that,’’ he said. ‘‘Cutting supply to defend pricing is part of the strength of the business and maintaining those price gains through FY11 will mean a better FY12 result regardless.’’

The company declared a fully-franked full year final dividend of 55 cents a share, compared to 8 cents the previous year.

The company’s shares were 23 cents, or 1.3 per cent, lower at $17.20 in mid-morning trade.

 


 

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