Lynas Rare Earths [ASX:LYC] Shares Fall with Earnings In 1H2023

Shareholders for Lynas Rare Earths [ASX:LYC] weren’t impressed after seeing the company’s results for the half year mark of FY2023.

The miner reported $150.1 million in NPAT (net profit after tax) for the first half, down from $559.9 million the year before despite remaining the second-largest producer of Neodymium and praseodymium (NdPr), two of the world’s most pursued rare earths.

Revenue rose $314.8 million to $370 million, yet earnings were diminished, and cost of sales also rose in the half.

LYC share was trading for $8.07 at time of writing, down 15.5% in the year and 20.5% within its sector’s 12-month average.

By comparison, competitor Arafura Rare Earths [ASX:ARU] has surged 232% over the year:

Source: TradingView

Lynas profits and earnings slide in 1HFY23

For the first half of fiscal 2023, Lynas posted NPAT had fallen to $150.1 million, while EBIT had dropped from $161.9 million to $158 million, even despite the uptick in revenue year-on-year.

Of course, getting in the way of profit was an increase in cost of sales, which had gone up from $140.3 million to $185 million as inflation made its mark.

The group managed to close out with cash and equivalents of $934.2 million, which was quite an increase on the total a year before ($674.2 million).

Lynas’ CEO, Amanda Lacaze, said the group achieved despite significant production challenges like water supply issues, and cost increases — particularly for chemical inputs.

No dividends have been paid or proposed for the group’s latest reporting period.

Ms Lacaze said the group remains focused on increasing operational efficiencies to mitigate a continued high-cost environment.

The group is also chasing an increase in production to meet high demand, aiming to deliver on growth projects and key priorities for its customers simultaneously.

It was noted by Lacaze that rare earths pricing has decreased slightly, down from its highs experienced towards the end of FY22, though market conditions remain stable.

Nevertheless, the group intends to develop an optimised product mix to continue achieving an improved average sale price for its customers.

This month, Lynas was notified that its Malaysian operating licence will be renewed for a three-year period.

Meanwhile, construction at Kalgoorlie’s Processing Facility has been accelerated, and with commissioning and ramp-up well underway, the group expects a feed target in Q4.

The Mt Weld Expansion Project was also noted to be ticking along solidly.

Lacaze concluded:

‘This has been an eventful half year for Lynas with the announcement of our Mt Weld capacity expansion project and accelerated construction activity on the Kalgoorlie Facility. At the same time, in Malaysia we overcame significant water supply issues to deliver a strong production result.

‘We continue to see increased demand from our customers who value Lynas’ unique position as a responsible and reliable supplier and we remain focused on serving our customers by executing our ambitious growth plan.’

Regards,

Mahlia Stewart,

For The Daily Reckoning Australia

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