Lynas posts 75% profit drop amid softening China demand
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The news: Lynas Rare Earths posted a year-on-year profit decline of nearly 75% as investment in capital projects and low market prices struck the miner's balance sheet.
The numbers: Lynas posted a net profit after tax of $39.5 million for the six months to December 2023, down 74% compared to the prior corresponding period. Revenue dropped 37% to $234.8 million, while EBITDA was down 67% to $62.6 million.
The rare earths producer said it invested $347 million in capital projects during the half, primarily related to the Lynas Kalgoorlie and Mt Weld expansion projects in Western Australia.
The context: Lynas flagged that rare earth market prices continued to be subdued due to low demand in China, especially in the appliance sector, which is affected by the construction downturn. While the average China domestic price of neodymium and praseodymium (NdPr) decreased from USD60.4 ($92.1) per kilogram in June 2023 to USD56 per kilogram in December 2023, Lynas said China's economic recovery is seen as the main factor which may trigger a change in price trend.
In January, Lynas announced that production had more than halved in the December quarter after a six-week shutdown to upgrade its Malaysia operations. The shutdown, which was planned to facilitate an upgrade to the miner's Malaysian facilities, is expected to increase NdPr production capacity to approximately 10,500 tonnes a year by December 2024.
Earlier this month, Lynas confirmed that it was in talks over a potential merger with US-based rival MP Materials Corp.
What they said: Lynas CEO and managing director Amanda Lacaze said: "The rare earths market is important to many industries and we continue to see strong customer demand for Lynas' products".
"Optimising our industrial footprint through operating efficiencies and capital growth projects will ensure Lynas is well positioned to benefit from forecast market growth and any improvement in market pricing conditions," she said.
The source: ASX announcement
