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Iofina's performance continues to improve

Published: 18:06 20 Sep 2018 AEST

Iofina production site
Shareholders are waiting on news about the IOsorb#5 plant

Iofina PLC (LON:IOF) found the market hard to please on Thursday with a set of interims that revealed an increase in revenue and underlying earnings.

The shares, which have been on a good run this month, fell 0.85p to 13.85p despite the iodine producer revealing a 20% increase in revenue in the first half of 2018 to US$11.3mln from US$9.4mln the year before.

WATCH: Iofina reports 20% increase in revenue as IOsorb plant IO#7 comes online

The period saw 264.1 tonnes of crystalline iodine produced, which was up 12% from 235.5 tonnes in the previous year while the top-line also benefited from improving iodine prices increased sales of crystallised iodine via the Group's chemicals business.

Underlying earnings (EBITDA) improved by 6% to US$724,847 from US$683,378 the previous year while the loss before tax was whittled down to US$750,429 from US$2.03mln in the first half of 2017.

At the end of the reporting period, cash balances had ebbed to US$3.0mln from US$3.3mln a year earlier.

The production rate of crystalline iodine in the third quarter of 2018 has thus far exceeded the preceding quarter’s output and the Iofina Resources division is on track to achieve the expected full-year production target of 575-605 tonnes of crystalline iodine in 2018.

The company is evaluating options for the IO#5 IOsorb plant and is determining whether to source an alternative brine supply or move IO#5 to another site. Final determinations should be complete by the end of 2018, the company said.

House broker finnCap said its expectation for the timing of the next new-build IOsorb plant has shifted “slightly to the right”, resulting in small adjustments to its forecasts.

Dr Tom Becker, the president and chief executive officer of Iofina, was more inclined to focus on the successful construction of IO#7 in the first half of the year, which he described as “a major milestone for the group”.

“We are pleased with the performance of the new IOsorb plant, which is the group's lowest production cost plant, and we anticipate a strong second half of the year because of this.

"In addition to the group's increased iodine production, expansion at the group's chemical business is also extremely encouraging. We have increased production capacity of three of our key iodine compounds as well as increasing production of a key non-iodine based product in response to rapidly increasing customer demand,” Dr Becker revealed.

READ: Better times ahead for Iofina as iodine prices recover

The group needs to repay its US$20mln debt facility, which was restructured in September 2016, by June 1 of next year together with the US$3mln drawn under the term loan facility, and Dr Becker said the board is working hard to achieve a solution for this.

“Whilst addressing the debt repayment requirements, the board remains committed to executing its growth strategy; to increase production of iodine and sales, whilst remaining a low-cost iodine producer,” Dr Becker said.

Broker finnCap said the results demonstrated encouraging progress in the operational turnaround of the group, Iofina’s interim results demonstrate encouraging progress towards its operational turnaround, with higher volumes, lower unit costs and better pricing all contributing to an improved bottom line.

“Moreover, the pace should accelerate in H2 now that the new IO#7 plant has ramped up,” the broker said.

“Years of cost-cutting and plant optimisation leave Iofina at the bottom of the cost curve and highly leveraged to the improving pricing environment. The restructuring of its debt is ongoing, but once concluded paves the way for Iofina to pursue additional growth plans – the performance of its IO#7 unit should give investors confidence in management’s ability to execute on its growth strategy,” it added.

'Things are adding up for Iofina' with increased year-on-year production

Tom Becker, chief executive of Iofina plc (LON:IOF), tells Proactive Investors 2017 was a year of 'substantial' progress for the company. Gross profit increased by US$2.2m from US$2.7mln to US$4.9mln while underlying earnings (EBITDA) improved by US$2.7m from a deficit of US$1.3mln to a...

on 30/4/18