Pilbara Minerals will be on the hunt for a new boss after long time CEO Ken Brinsden revealed plans to step down from the role by the end of this year. One thing is certain, however – before he goes, he will deliver the company’s first full year result and that will be a pretty big profit.
After revealing a very strong December half year performance and providing shipments of spodumene concentrate are sustained at the strong first half rate and the recent surge in price rises is maintained, Pilbara could be looking at a net profit in excess of $300 million for the year to June and revenues around $600 million.
Pilbara says it hopes to have found a replacement by the September quarter of this year.
That means Mr Brinsden will be matching the strong interim report with a possibly even stronger full year report in August, before he goes.
Pilbara told the market on Wednesday that it earned an inaugural interim after tax profit of $114.0 million for the December half year.
“The result reflects continued improvement in lithium market conditions over the period, which has continued its strong momentum into the current half,” the company said.
“The profit result was underpinned by an operating gross margin from the Pilgan operation of $172.1 million (1H FY2020: $13.2 million), with the $158.9 million improvement in gross margin” due to the company shipping 170,228 dry tonnes of spodumene concentrate in the half at an average selling price of around $US1,250 a dry tonne (around $A1,700/ a dry tonne).
Pilbara said demand for and pricing of lithium chemicals and spodumene concentrate” increased significantly during the period, resulting in record revenue of $291.7 million, almost five times the $59.1 million earned in the December, 2020 half year.
Pilbara said that “since the end of the half-year pricing has continued to increase with price reporting agencies currently indicating spot spodumene concentrate prices in the range of $US3,750-$US4,500 a dry tonne.
Pilbara reported earnings before interest tax depreciation and amortisation of $151.1 million for the half year (from just $3.2 million in the December, 2020 half).
Pilbara Minerals achieved an underlying profit after tax for the half-year of $84.2 million and after recognising the benefit of prior year tax losses of $66 million (and expensing $36.2 million of non- cash acquisition costs related to the acquisition of Altura Lithium last year,) the Company achieved a profit after tax for the half year of $114.0 million. That was up from the $21.2 million loss the year before.
The improved market conditions (as shown by the sharp rise in shipments and rising prices) gives Pilbara more certainty in realising prior year tax losses of $66 million (tax effected; net of deferred tax balances), the company explained on Wednesday. That means that will reduce any tax bill due at June 30 if the surge in prices and shipments continues.
Seeing current prices for spodumene concentrate are currently around 3 times the December, 2021 half year average of $US1,250 a tonne and assuming production continues at the first half rate, Pilbara could be reporting an even larger result for the June half a year and a significantly higher full year profit for 2021-22.
Given that possibility it was no wonder Mr Brinsden said he was confident about the outlook in Wednesday’s release.
“…the outlook for Pilbara Minerals in the second half of FY2022 and beyond remains extremely bright. The current momentum in lithium markets continues to demonstrate higher price outcomes and we are very well placed to participate in this as production and sales volumes from the combined Pilgangoora Operation continue to increase, “ he said.
Investors responded positively, pushing the shares up 2.1% by the close to $2.85.
