LA Private

Pilbara Minerals maintains hold on cash reserves

Despite a 71% slump in its cash margin in the six months to December, Pilbara Minerals (ASX:PLS) maintained a hold on its cash reserves, which ended the half at just over $2.144 billion, down just 4% from a year earlier when $2.22 billion was on hand.

The cash pile, built in 2022-23, has enabled the company to ride out the slump in prices and weaker demand for the metal while cutting costs and outgoings like dividends to preserve as much as possible.

The lower result was basically known from the company’s December quarter and half-year production and sales reports last month, which revealed the output, sales, and other data, and revealed a decision to suspend the company’s interim dividend payment.

That decision was confirmed on Thursday by CEO Dale Henderson, who said in the statement:

“Our strong balance sheet positions the business to navigate any period of softer pricing and provides a competitive advantage relative to many peers within the sector. To further reinforce the balance sheet, prudent steps were undertaken to further preserve capital, including the decision to withhold any interim dividend payment. Strong EBITDA margins of 55% were delivered during the period despite the softer pricing environment for lithium. Although pricing has reduced significantly from the prior year record highs, the Company finds itself in a position of strength. With the Company’s low unit-cost structure and strong balance sheet, Pilbara Minerals is uniquely placed to better withstand periods of softer pricing whilst continuing to build out the production base to capitalize on improved pricing conditions.”

The cash outcome came on a massive slide (not unexpected) in revenue and earnings from the company’s spodumene exports from the Pilbara.

The fall was slightly offset by higher production and sales in the half-year.

Output rose 4% to 320,200 tonnes in the half, while sales rose 75 to 306,300 tonnes.

But with the average price falling 67%, revenue for the half dropped 65% to $757 million from the high $2.18 billion a year earlier.

That saw EBITDA slump 78% to $415 million, which saw underlying net profit down 78% to $273 million and statutory profit down 82% to $220 million.

The cash pile was maintained because the company had a cash margin from operations of $536 million in the half-year as the company’s EBITDA margin remained around.

The result belied a lot of the gloom and doom around lithium and underlines how companies early into the business can still make a return at low prices – IGO and MinRes come to mind as well as Pilbara.