Western Areas (ASX:WSA) share price falls after last year’s $32 million profit turns to $8 million loss

The minerals company has had a rough 20/21.
The post Western Areas (ASX:WSA) share price falls after last year’s $32 million profit turns to $8 million loss appeared first on The Motley Fool Australia. –

The Western Areas Ltd (ASX: WSA) share price is falling after the company released its full-year results for FY21.

At the time of writing, shares in the minerals company are trading for $3.10 – down 1.9%. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is 0.32% higher.

Let’s take a closer look at today’s announcement.

Western Areas share price slumps on 16% fall in revenue

Revenue fell 15.6% on the prior corresponding period (pcp) to $257 million.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $73.5 million – down 39.7% on the pcp. The EBITDA margin fell 10 percentage points to 29%.
Net loss after tax of $7.7 million compared to $31.9 million NPAT in pcp.
Net cash inflow of approximately $6 million.
No dividend paid for the financial year. In FY20, 2 cents per share was paid out to investors.

What happened in FY21 for Western Areas?

The price of nickel plays a key role in the movement of the Western Areas share price. In FY21, nickel appreciated 42.8% although the company didn’t capitalise.

Western Areas shares experienced a massive shock in October when it downgraded its nickel forecast at its Flying Fox mine by 2,000 tonnes. As well, the company said unit costs would be higher than anticipated.

Nickel demand is surging as more consumers buy electric vehicles. Nickel is a key component of electric vehicle batteries. While the alloy metal had a great FY21, the Western Areas share price was not so impressive.

What did management say?

Western Areas Managing Director Dan Lougher said FY21 was “a tale of two halves”:

I am proud of the professional and resilient performance of the technical team which successfully overcame the mine production difficulties encountered in the first half to enable the improved second half production and costs performance. Ultimately it was this turn around that allowed us to deliver into updated guidance for FY21.

At Odysseus, our new long life mine continues to advance towards production of first ore in this September quarter, which will mark a very significant milestone in its expected 10 plus year mine life. Odysseus remains one of the few long-dated supplies of nickel sulphide to enter the market in the coming years, just as the EV market continues to drive nickel demand for delivery into the EV battery supply chain.

What next for Western Areas

The Western Areas share price rocketed in early August after the company and IGO Ltd (ASX: IGO) confirmed IGO was looking to acquire Western Areas.

At the time, the company said nothing was confirmed and this has still not changed as at the time of writing. It’s notable Andrew “Twiggy” Forest bought a 10% stake in the company in August as well.

Western Areas also gave a guidance for FY22 in today’s release. The company says it expects to produce between 16,000 and 17,000 tonnes of nickel at a unit cost of $4.25 to $4.65 per pound.

Western Areas share price snapshot

Over the past 12 months, the Western Areas share price has increased 28%. It has outperformed the ASX 200 by almost 6.5 percentage points.

Western Areas has a market capitalisation of around $1 billion.

The post Western Areas (ASX:WSA) share price falls after last year’s $32 million profit turns to $8 million loss appeared first on The Motley Fool Australia.

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More reading

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Can the Western Areas (ASX:WSA) takeover prompt BHP (ASX:BHP) to go nickel shopping?
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Why Adairs, Redbubble, Treasury Wine, & Western Areas are storming higher

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

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