AR

I am surprise there are not more comments on AR. I for one I was very surprised at how good it was. I will be changing my sell to a hold.

Before I say why let me say that I have been very busy and have not listened to CC. I need two straight hours to do this since I always listen twice. I have read the report but have not gone through notes at all yet.

First they made 80 M I was expecting 40 ~ 50.

Next as told by Q reports Revenue was down H2 363.5 - H1 179.8 = 176 M. This was my basis for expecting poor earnings. Also management cost for Malaysia and WES problems was up. Instead profits soared to 80M Y -19 M H1 = 61 M H2. What is even more amazing is profits divided by revenue for H2 61 / 176 = 35% Few manufacturing companies can achieve this ratio.

This brings up one Question and that is why are they cutting production? The only answer i have is that the REO market is in critical balance and they know any increase in supply will drop prices dramatically. This also takes a weapon out of China's hand cutting supply will result in higher prices but Lynas will scale up quickly causing them to drop. So China sells less at same price. Lynas sells more and makes better than 35% on those sales.

The 35% profit margin H2 cause me to change several things. I recently raised my estimate on the Nd price for breakeven from 240~ 250 to 275 ~ 285. I did this because I thought AL was cutting productions to avoid loses. She was doing this to avoid loses that would be caused by much lower prices not because they could not make money at those prices. I need time to come up with a new estimate but my guess is it will be below 240~ 250. A simple way would be to say they made 35% at an average price of 300 RMB. That quick calculation says about 200RMB. But that is a very quick guess.

Normally I would already be buying but I am not. Simple reason is the WW economy, nothing to do with Lynas. The very fact that AL is holding back profit makes me speculate that Nd &Pr product are in a very critical balance. That any more slowing of WW economy could tip that balance. Firming would raise it as well. I may nibble but I will not go all in at this time.

Posting this before listening to CC and reading AR in depth may make me look foolish but I wanted to get it out since it is a major flip for me. This is how I see it without those inputs.