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Iluka shares fall after $20.9m net loss

Nicholas Grove  |  25 Aug 2016Text size  Decrease  Increase  |  

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The mineral sands miner records "poor" half-year results, with higher sales volumes unable to offset lower prices.


Shares of Iluka Resources (ASX: ILU) were nearly 7 per cent lower at midday on Thursday, after the mineral sands miner reported a net loss of $20.9 million for the half year to 30 June 2016.

The result compares to a $20.4-million profit in the first half of 2015.

Iluka attributed the result to lower income received from its Mining Area C iron ore royalty (MAC), and higher first-half nonproduction cash costs associated with a significant investment in trialling an innovative mineral sands mining technique.

Other factors influencing the result included lower US-dollar prices for zircon, lower ilmenite sales and sales mix factors, the company said.

During the half, operating cash flow was negative $15.5 million, with receipts from customers down $106.8 million, while net debt increased to $124.1 million from $80.2 million at 30 June 2015.

Iluka's interim dividend was halved on the same period in the previous year to 3 cents a share, fully franked.

The dividend is payable on 6 October 2016 for shareholders on the register as at 9 September 2016.

Iluka managing director David Robb said the poor half-year financial results reflected a lack of overall revenue growth, despite 15 per cent higher zircon/rutile/synthetic rutile sales volumes.

"Lower prices prevailed, especially for zircon, as Iluka responded to competitor price positioning, but gross margins were protected through reductions in unit costs of goods sold," he said in a statement to the ASX.

"Earnings and free cash flow generation were adversely affected, influenced in part by the timing of sales towards the end of the half and therefore lower collections occurring within the half.

"As the company has indicated previously, free cash flow is expected to be second-half-weighted."

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Nicholas Grove is a Morningstar journalist.

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