Iluka Resources Limited : Iluka Resources Profit Soars On Higher Prices; Eyes Lower Zircon Output
02/22/2012| 06:08pm US/Eastern
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Australian mineral sands producer Iluka Resources Ltd. (ILU.AU) Thursday posted a sharp jump in annual profit as it benefited from higher prices for its products, but said that while prices are likely to rise further near term its output of two key commodities would fall.
The company didn't offer any guidance for revenue in the current year, but said it was expecting costs to rise further, partly due to the lower production
"It is likely to take some time for a clear profile of likely 2012 product demand to emerge, particularly for zircon," said David Robb, managing director of Iluka.
"In this context, and given evidence of a softening in the near term zircon demand outlook, Iluka has the ability to moderate zircon production accordingly while still retaining the ability to respond quickly to demand recovery and while preserving high grade titanium dioxide production," he said.
Net profit soared to A$541.8 million (US$576.2 million) for the year from A$36.1 million in 2010 as mineral sands revenue climbed 76% to A$1.54 billion from A$874.4 million.
The company declared a final dividend of 55 cents a share, compared with 8 cents a year earlier, and Robb said in a statement that while Iluka may hold a "cash buffer" until global economic conditions become more stable it would seek to return cash to shareholders via dividends.
Iluka is the world's largest zircon producer, accounting for about a third of global market share, and one of the biggest producers of titanium dioxide minerals. Zircon has a number of applications, including in ceramics, while titanium dioxide is predominantly used for producing pigments.
The company said in mid-January its overall mineral sands production rose 10% in 2011 to almost 1.63 million metric tons. It at the time said there was evidence of softening near-term demand for zircon, but that it was able to moderate output to match this over the next quarter or two.
Iluka Thursday forecast production of zircon would decline to about 500,000 tons this year from 601,000 in 2011, and said its sales volumes could be about 10% below output depending on global demand. It said rutile production was likely to fall to about 225,000 tons from 281,000 last year as it moves to new deposits, but synthetic rutile production was expected to increase to about 310,000 tons from 285,000.
The company said weighted average zircon prices were expected to be roughly US$100/ton higher in the first quarter than at the end of 2011, while rutile prices were expected to average US$2,400/ton in the first six months of the year against US$1,340 at the end of last year. Synthetic rutile prices are expected to average US$2,050/ton in the first half, compared with US$1,075 at the end of 2011.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094; robb.stewart@dowjones.com
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