2012 was not a good year for Iluka shareholders; the share-price fell from $19 to just $7.36 by the end of November. This disaster followed earnings down-grades as a weak property market in China hit the sales of Zircon, and demand for rutile in Europe evaporated.
To put the company’s financial result into perspective:
- Mineral sands sales revenue declined by 30% in 2012 compared with 2011.
- Net profit after tax declined 33% to $363 million, which was still the second highest profit the company had recorded.
- Return on capital was 32.,4% and return on equity was 23.22% but most of the revenue was generated in the first half.
To offset the reduced demand and revenue, production and costs have been lowered.
It now seems that prices have stabilized and sales are up on last year. The company is retaining key customer markets, and is continuing to research and explore.
The share-price has formed a double bottom with the last down spike in December 2012.
Since then an uptrend has emerged with the last high at $12, corresponding to the 38.2% Fibonacci level.
The present uptrend will remain intact if in the next retracement a higher low is formed with the price above the last low of $8.60.
Iluka is a major producer of essential mineral sand products in a competitive market. It is a cyclical industry and is still in a period of reduced demand. It seems to be well-managed, and will undoubtedly experience more buoyant conditions in coming years.
The stock has undoubtedly been oversold, and one would expect a slow but steady recovery to continue.
The next target to meet if present momentum continues is $13.15, the 50% retracement level.
- Iluka earnings to fall in 2013 (bigpondnews.com)
- Iluka May Increase Production as China, US Demand Recovers – Bloomberg (bloomberg.com)