Insights

Iluka’s (ASX:ILU) record high profit results got lost in translation

Don’t be fooled by the profit surge in Iluka Resources Limited’s (ASX: ILU) results this morning that sent its bottom line to record highs.
The post Iluka’s (ASX:ILU) record high profit results got lost in translation appeared first on The Motley Fool Australia. –

mining Iluka record profit results

Don’t be fooled by the profit surge in Iluka Resources Limited’s (ASX: ILU) results this morning that sent its bottom line to record highs.

The mineral sands miner posted a net profit of $2.41 billion for the 2020 financial year ended 31 December. This compared to a loss of $300 million in the year before.

But the dramatic swing to profit was largely due to gains from its spin-off of Deterra Royalties Ltd (ASX: DRR).

Iluka’s big profit result boost from Deterra spin-off

That transaction added $2.25 billion to Iluka’s net profit for the year, while the performance at its remaining mineral sands business declined.

Mineral sands revenue fell 20.6% to $947 million while earnings before interest, tax, depreciation and amortisation (EBITDA) tumbled 35.6% to $342 million.

The weaker numbers won’t come as a big surprise though. The COVID-19 pandemic hurt zircon sales volumes early in 2020 as ceramic plants (which use zircon) were forced to shut or work at reduced capacity.

No day at the beach for mineral sands in 2020

The price of zircon fell in the March quarter as the crisis unfolded but managed to stabilise thereafter.

Meanwhile, Iluka’s synthetic rutile sales volumes were down largely due to the contractual dispute with major customer Chemours.

Few bright spots in Iluka’s profit results

Rutile prices were the only bright spot as the price for the commodity increased due to supply tightness.

Another silver lining was that management managed to achieve an EBITDA margin of 36%. While that’s down from the 45% level it reported in 2019, that’s still a respectable margin given its operating leverage.

A drop in revenue will almost always have a much larger impact on a miner’s bottom line and margin due to the high fixed cost nature of the industry.

Brighter outlook in 2021

There are signs that Iluka’s mineral sands revenue could improve in 2021. The miner told its customers it is increasing zircon prices to US$70 a tonne from April.

The price increase comes as Iluka noted signs of recovery in market conditions for zircon and high-grade titanium dioxide feedstocks.

While the contract dispute with Chemours hangs over the group, management believes it will be able to sell at least 295,000 tonnes of rutile and synthetic rutile this year.

This is because of the take-or-pay contracts it has with a range of customers. These contracts commit customers to buy a mandated minimum amount of the commodities from Iluka.

The miner’s 2021 production forecast is for 285,000 tonnes of zircon, 200,000 tonnes of rutile and between 115,000 and 175,000 tonnes of synthetic rutile.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Brendon Lau owns shares of Deterra Royalties Limited and Iluka Resources Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Iluka’s (ASX:ILU) record high profit results got lost in translation appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!