Pilbara Minerals records lower revenue

Hey Superheroes,

What a rollercoaster of a week it’s been! 

Despite strong earnings on Wall Street, global markets have continued to be in the red. The Nasdaq is now in correction territory while the S&P 500 is on the verge of it. A market is in correction when it’s at least 10% off its peak.

Today’s top story is on Superhero’s most-traded ASX stock this month: Pilbara Minerals.

Pilbara Minerals: lower production, lower sales and lower lithium prices

In the last two years, Pilbara’s journey has been nothing short of astounding.

From a net loss of A$51m in FY2021, Pilbara has gone on to record net profits of A$562m in FY2022 and A$2.4b in FY2023. It paid out 25c in total dividends this calendar year – a 6.5% dividend yield using yesterday’s closing price (for reference, the average yield of the All Ords index is currently 4.12%). 

Pilbara’s dividend policy even raised hopes of either a special dividend or share buy-back this year, given that it ended FY2023 with a massive cash balance of A$3.3b.

⛰️ It’s not always up

Sadly, Pilbara’s quarterly activities report released yesterday quashed those hopes.

Production levels were 11% less quarter-on-quarter, while sales volume slowed by 17%. 

Additionally, the realised sale price of Pilbara’s minerals was down by 31% – from US$3,256/t to US$2,240/t.

Overall, Pilbara’s revenue was 42% lower in Q1 FY2024 than in Q4 FY2023. 

📝 What investors should note

While that isn’t too exciting, Pilbara does justify the numbers.

Production volume was lower mainly due to one of Pilbara’s operations temporarily shutting down to make room for expansion. The company expects this to continue into next quarter.

Sales volume on the other hand, actually grew by 6% compared to Q1 FY2023. 

And while they’ve confirmed that there won’t be a special dividend this year, Pilbara did announce that it aims to direct the cash towards growth opportunities instead. Woohoo!

🪫 Lithium price weakness

What’s out of Pilbara’s control are Lithium prices.

Pilbara sold its ores at an average price of US$4,447/t in FY2023; almost double this quarter’s. Prices peaked in November last year and have been in a downtrend since then with several possible reasons as to why.

Pilbara expects more volatility from lithium prices in the near future but notes that the long-term outlook remains positive. 

U.S. Earnings Season Highlights

We’re deep into the U.S. quarterly earnings season and some big names have reported this week!

Here are the ones that broke the news.

🖥️ Alphabet Inc. (Google)

Google exceeded expectations for both revenue and earnings thanks to stronger advertising revenue and lower expenses. 

However, its share price is down 11% following news that its cloud business is falling behind that of Microsoft and Amazon. 

Analysts expected revenues of US$8.6b for the segment, but Google only recorded US$8.4b.

📱Meta Platforms

Meta has also recorded stronger-than-expected numbers with net income double that of the same quarter last year. The company highlighted its Threads app, which now has just under 100 million monthly active users.

The strong numbers highlight the success of Meta’s “year of efficiency” strategy, which outlines Zuckerberg’s plan of boosting its share repurchase plan while lowering costs.

🔦  Some other things we’re shining the Spotlight on:

ISN’T THAT GOOD NEWS?: U.S. markets dropped overnight following strong GDP numbers. The U.S. economy grew at an annualised 4.9% in Q3 2023 – the highest since 2021 – sparking worries of stickier inflation.

HARVEY NORMAN GOES SHOPPING: Harvey Norman announces its intent to buy back up to 10% of its shares despite slowing sales. The company expects to commence its one-year buyback programme to start next month.

WESTPAC’S NOTABLE ITEMS: Westpac has flagged A$173m of “notable items” (a.k.a. one-off expenses) that’ll be reducing its net income for FY2023. On the bright side, that pales in comparison to its A$874m of notable items in FY2022. Westpac will report full year results on November 6.

That’s all for this week’s Spotlight! 

If you’d like to keep up to date with market news and company results, chuck us a follow on our Instagram page, @superheroau!