The beach sand miner Iluka Resources has confirmed it had a fabulous 2011 with sales and earnings soaring to record levels.
The group yesterday revealed a net profit of $541 million, more than 15 times higher than its 2010 takings.
Revenue jumped 69% to $1.6 billion thanks to surging demand and prices for its main products, zircon and rutile (titanium oxide).
Despite the news, the shares failed to react, falling 57c or 3.2% to $16.86 as management warned the boom in beach minerals may have peaked with signs of easing prices and demand for zircon emerging.
Iluka has cut its production guidance for zircon by 10% to half a million tonnes, from 550,000 tonnes last year.
But at the same time, demand and prices for titanium oxide (from rutile and used in paints) were still solid and will continue into 2012.
Dividend for the 2011 jumped to 75c, from the 8c a share paid in 2010.
The final payout was pushed up to 55c a share from 8c paid in the final six months of 2010.
China’s hunger for mineral sands helped boost Iluka earnings as they vaulted from 2010’s $36.1 million.
Demand for and prices of mineral sands such as zircon and titanium dioxide are booming.
Prices more than doubled in the past year with China leading the demand to use it mostly in paints and electronics, but also in more esoteric industries such as 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 reported yesterday.
Mineral Sands EBITDA for the year was $925.9 million, up 270% from 2010.
Iluka said its Mining Area C iron ore royalty made an EBIT contribution of $88.1 million, as a result of iron ore sales volumes from the BHP Billiton mine in the Pilbara rose 3.2% to 44.6 million dry metric tonnes.
"The average AUD realised price upon which the royalty is payable increased by 18.9 per cent from the previous corresponding period. A $1.0 million capacity payment was made in 2011 (2010: $5 million).
"Group EBITDA, including Mining Area C contribution, was $979.3 million, with a Group EBITDA margin of 64%, which puts Iluka up there with BHP Billiton and Rio Tinto as some of the most profitable companies in the country.
"Group EBIT was $790.3 million, compared to $86.1 million in the previous corresponding period.
"Cash costs rose by 15%, to $628.9 million, but the unit cash cost of production was unchanged at $538 per tonne.
"The surge in revenue to $1.631 billion was due to higher prices for zircon, rutile and synthetic rutile products, but offset by the stronger Australian dollar."
lluka’s managing director David Robb noted evidence of a softening in demand and prices for zircon but higher prices for titanium dioxide in comments to analysts and in yesterday’s announcement.
"It is likely to take some time for a clear profile of likely 2012 product demand to emerge, particularly for zircon," Mr Robb said.
"In this context, and given evidence of a softening in the near term zircon demand outlook, Iluka has the ability to moderate zircon production accordingly, while still retaining the ability to respond quickly to demand recovery and while preserving high grade titanium dioxide production.
"This product flexibility is important, given that zircon price rises have moderated but high grade titanium dioxide sales volumes in the first half of 2012 will be delivered at prices appreciably higher (up 80 to 90 per cent) than in the second half of 2011," he added.
And Australia’s biggest general insurer, Insurance Australia Group, has joined rival Suncorp in surprising the market with a better than expected first half effort.
Whereas Suncorp surprised with a bigger than expected profit, IAG’s fell less than forecast by the market.
And despite the weak result and high claims costs (with the big storm in Melbourne on Christmas Day the latest problem), the company is looking at an improvement in the second half, if those disasters stay away.
"We’re upgrading our revenue target and still expect to achieve a reported insurance margin within our original guidance of 10-12%, although at the lower end of that range," CEO Mike Wilkins said yesterday.
IAG yesterday revealed an 11% drop in first-half net profit, with general insurance profit lowered (as forecast last year) by higher reinsurance costs after the record disaster claims in 2011.
IAG said first half-net profit was $144 million compared with $161 million a year ago, but it was well above the $119 million average forecast from the market.
That saw IAG shares break out of their rut and jump more than 8.2% to close at $3.14, a rise of 24c on the day.
Investors liked several hints to emerge from the profit statement and briefing yesterday.
Mr Wilkins outlined a plan to extract more profits from IAG’s CGU business through a revised operating model.
There was also the higher full-year revenue target, he reconfirmed its full-year insurance margin target and gave a strong hint that the struggling UK business was on the verge of breaking even.
