Iluka reduces dividend amidst revenue and earnings slump

Company News

by Glenn Dyer

Mineral sands producer Iluka Ltd has made a significant cut to its interim dividend, offering just 3 cents per share for the six months ending June 30. This stands in stark contrast to the 25 cents per share dividend paid for the same period in 2022. The decision comes in response to a decline in both revenue and earnings, attributed to the global decrease in demand and prices for mineral commodities.

During the June half, revenue experienced a 10% decline, totaling $712 million, leading to a 22% drop in EBITDA to $353 million for the period. Additionally, after-tax profit saw a notable decrease of 45%, reaching $204 million.

Iluka reported that it managed to achieve increased prices and robust margins during the first half, despite evolving market dynamics. The company acknowledged the subdued demand for mineral commodities due to global macroeconomic uncertainty, particularly compared to the immediate post-COVID-19 years. Despite these challenges, Iluka emphasised its commitment to optimising value production and reinforcing positive supply-side fundamentals for high-quality zircon and high-grade titanium feedstocks.

To address the situation, Iluka has taken measures to reduce production and costs simultaneously, including a four-month production halt at SR1 (a synthetic rutile kiln) at its Capel mine in Western Australia, starting from September 30. Iluka noted that restarting SR1 will coincide with planned major maintenance for the SR2 kiln at Capel, utilising the SR1 workforce for SR2 maintenance. This strategic move is expected to save around $4 million in external costs. Both SR1 and SR2 are scheduled to resume operations at the end of January next year.

Iluka highlighted its ongoing focus on projects, particularly Balranald and Eneabba (a rare earths project), which are currently in the execution phase. The front-end engineering and design (FEED) for Eneabba is projected to conclude later this year. Moreover, Iluka has initiated a feasibility study into rare earth metallisation.

Metallisation, as a value addition stage following the production of rare earth oxides, holds strategic significance. If realised, a commercial-scale metallisation facility in a Western jurisdiction could eliminate the need for customers to process oxides through third-party tolling facilities, potentially broadening Iluka's customer base and enhancing its reputation as a sustainable producer of light and heavy rare earths with traceable product provenance.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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